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| Go Away Federal Reserve System! (Photo credit: r0b0r0b) |
Washington, Mar.5, stocks to watch .- A key member of the Federal Reserve on Monday gave her clear support for continuing the central bank’s policy of buying bonds at current levels.
“At present, I view the balance of risks as still calling for a highly accommodative monetary policy to support a stronger recovery and more rapid growth in employment,” Federal Reserve Vice Chair Janet Yellen said Monday in a speech to the National Association for Business Economics.
While there are some potential costs to the purchases, “at this stage, I do not see any that would cause me to advocate a curtailment of our purchase program,” she said.
Yellen is seen as a possible replacement for Fed Chairman Ben Bernanke if he steps aside when his second term ends in January 2014.
Bernanke also endorsed the Fed’s current policy, in a speech on Friday night. See: Bernanke says hasty end to easing could backfire.
“A premature removal of accommodation could, by slowing the economy, perversely serve to extend the period of low long-term rates,” Bernanke said in a speech to a Fed research conference in San Francisco.
Yellen’s comments add weight to the idea the Fed will maintain an $85 billion-a-month bond purchase program at its next meeting on March 19-20.
There has been vocal criticism of the Fed’s ultra-easy stance, from inside and outside the central bank.
Some, like Kansas City Fed President Esther George, have expressed concern that the low rates and asset purchases will foster overheating in some markets and lead to inflation.
Yellen said that she viewed financial market stability concerns as “the most important potential cost” with current policy.
“At this stage, there are some signs that investors are reaching for yield, but I do not now see pervasive evidence of trends such as rapid credit growth, a marked buildup in leverage, or significant asset bubbles that would clearly threaten financial stability,” Yellen said.
In the question-and-answer session, Yellen stressed that ending the monthly asset purchases is not an end of easing but stopping “more and more accommodation.”
“We keep adding accommodation so long as we engage in [asset purchases], it’s as though we are putting more and more and more accommodation into the system,” Yellen said.
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