Federal Reserve Chair Janet Yellen, easing investor concern that interest rates may rise earlier than previously forecast, said the central bank’s unprecedented stimulus will be needed for “some time.”
Yellen, citing the examples of three people struggling to find work, used a speech to a community development conference in Chicago to make the case for continued Fed stimulus, which has included more than five years of interest rates near zero and trillions in bond purchases.
“This extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policymakers at the Fed,” Yellen said in her remarks to a Fed community development conference. “The scars from the Great Recession remain, and reaching our goals will take time.”
Stocks rose as Yellen highlighted the Fed’s commitment to spur the economy and put 10.5 million unemployed Americans back to work. Share prices fell on March 19, when she said in a press conference that the Fed might start raising the benchmark interest rate above zero about six months after ending its bond purchase program. Yellen didn’t mention a timetable today.
“It is an indirect pushback,” said Ward McCarthy, chief financial economist at Jefferies LLC in New York. “I don’t think she could directly contradict what she said at the press conference, so she did the next best thing, which was to paint a picture of a Fed that is going to be accommodative for a long, long time.”
Large numbers of partly unemployed workers, stagnant wages, lower labor-force participation and longer periods of joblessness show that “there remains considerable slack in the economy and the labor market,” Yellen said.
The Standard & Poor’s 500 Index rose 0.6% to 1,868.55 at 11:38 a.m. in New York. The yield on the 10-year Treasury note was up two basis points, or 0.02 percentage point, to 2.74%.
The Federal Open Market Committee has kept the benchmark interest rate near zero since December 2008 and sought to cut borrowing costs and fuel growth through bond buying that has more than quadrupled its assets to $4.23 trillion.
While policy makers have slowed the pace of their monthly asset purchases over the past three gatherings to $55 billion from $85 billion, Yellen said the central bank’s “commitment is strong” to helping sustain progress in the job market.