Janet Yellen defends Fed policies in Senate hearing
Janet Yellen, the woman the White House wants to run the Federal Reserve, has defended its stimulus efforts and vowed to continue them if confirmed.
In her first appearance in front of Congress, she said the Fed's $85bn (£53bn) bond-buying programme was a "meaningful contribution to economic growth".
Ms Yellen has been chosen to lead the US central bank once Ben Bernanke's term ends in January.
To be confirmed, she needs 60 votes.
During the Senate Banking Committee hearing, which is often a chance for senators to tout their own individual interests, Ms Yellen was asked about everything from gold prices to "too big to fail" banks, as well as whether or not the stock market was in a bubble.
Appearing calm despite the range of questioning, Ms Yellen answered with ease - she follows gold prices, will assess current banking reforms once they're implemented, and doesn't think markets are in bubble territory.
Through it all, she remained firm in her commitment to continue the current Fed's extraordinary stimulus measures.
In prepared testimony released before the hearing, Ms Yellen said: "I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy."
This pleased investors and sent markets slightly higher, and they continued to rise during her testimony.
"As expected, Janet Yellen has been a defender of an accommodative monetary policy, and sounded remarkably like Ben Bernanke on key current issues," wrote Jefferies chief US economist Ward McCarthy in a note to clients.
"In sum, being Fed Chairman is not going to change her. Over her career, she has been a pragmatist, which means that she will remain committed to promoting growth in the current economic environment."
Currently, the Federal Reserve is buying $85bn worth of bonds a month, in a move known as "quantitative easing", which is designed to keep interest rates extremely low.
During the hearing, Ms Yellen defended the programme against criticism from senators who called it "elitist" and said it did not contribute in a meaningful way to economic growth.
"The purpose of these purchases was to push down longer-term interest rates and we have seen interest rates fall very sustainably," said Ms Yellen, highlighting lower mortgage rates.
She added that if she was confirmed, she would not begin the process of slowing those purchases - termed "tapering" by analysts - until the employment situation improved.
"It's important not to remove support, especially when the recovery is fragile and the tools available to monetary policy, should the economy falter are limited," she said.
The word "unprecedented" was used repeatedly in the hearings, both to describe the Fed's current stimulus measures and the current state of the US jobs market.
Ms Yellen, in a slight departure from her predecessor, brought a human touch to her discussions of the labour market, highlighting the plight of the long-term unemployed.
She noted that 36% of those who were unemployed had been so for longer than six months and called it a "virtually unprecedented situation".
"Those long spells of the long-term unemployed are particularly difficult for households," said Ms Yellen, mentioning the impact on marriages.
Senator Richard Shelby, a Republican from Alabama, also asked Ms Yellen if she considered the current extraordinary bond-buying efforts at the Fed to be unprecedented, to which she answered yes.
Expressing a scepticism shared by many Republicans, Mr Shelby implied that "quantitative easing" was a made-up term, and asked Ms Yellen if the current programme could continue indefinitely.
She answered: "I agree that this programme cannot continue indefinitely," but added that it certainly would continue for the foreseeable future.
'Not a prisoner'
Finally, Ms Yellen said she would continue the Fed's efforts at transparency, calling it the most transparent central bank in the world.
She defended the bank's communications surrounding its decision to begin slowing stimulus efforts, which rattled markets over the summer and into the autumn, when no "tapering" decision was announced.
Senator Robert Corker, a Republican from Tennessee, asked if the Fed had become a "prisoner" to its policies and market reaction.
Ms Yellen acknowledged that the Fed was concerned when mortgage rates rose over the summer in reaction to a perceived end to bond-buying.
But, she added, the Fed was "not a prisoner to markets".