–When Appropriate Withdraw Accomm Mon Pol in Careful,Deliberate Fashion

By Brai Odion-Esene

WASHINGTON (MNI) – San Francisco Federal Reserve Bank President
Janet Yellen said Thursday that given the large numbers of unemployed in
the United States, the main focus of monetary policy right now should be
job creation.

In her testimony on her nomination to serve as vice chair of the
Fed, she added, however, that any threats to price stability must also
be avoided.

“Over the next few years, the Fed must craft policies that ensure
that our economy accelerates its progress along the recovery path it has
begun to trace,” Yellen said in a statement prepared for delivery to the
Senate Banking Committee confirmation hearing.

She emphasized that with unemployment “still painfully high, job
creation must be a high priority of monetary policy.”

This does not mean the Fed should lose sight of its other mandate
to maintain price stability, she said.

“That means that, when the appropriate time comes, we must withdraw
the extraordinary monetary accommodation now in place in a careful and
deliberate fashion.”

If approved for the post of Fed vice chair, replacing the retiring
Donald Kohn, Yellen said her approach going forward, as in the past,
“will be to bring a thoughtful and independent voice to Federal Open
Market Committee deliberations on monetary policy.”

“I am wholeheartedly committed to pursuing the Federal Reserve’s
congressionally mandated goals of maximum employment and price
stability, and to strengthening our program of supervision and
regulation, building on the lessons learned during the financial crisis”

Yellen said the central bank must work together, and in cooperation
with central banks and governments around the world, to mitigate
systemic risk in the financial and payments systems “so that our country
never again suffers such a devastating episode of financial
instability.”

During the hearing, Yellen is certain to be grilled by Committee
members on the subject of Fed transparency as well as accountability,
and she tackled the issue in her statement, saying Congress wisely
granted the Fed freedom to make independent monetary policy decisions in
pursuit of congressionally-mandated goals, “based on a forward-looking
perspective and the best judgments of Federal Open Market Committee
participants.”

She argued that, “When central banks are independent, economies
perform better, inflation is lower and more stable, and long-term
interest rates are lower and less volatile.”

The Fed remains accountable for its actions, however.

“The Fed must explain its actions, outlook and strategy, and
provide the information necessary for Congress and the public to
understand and evaluate its policy decisions,” Yellen said.

“I strongly support Fed independence in monetary policy and I am
committed to enhancing the transparency that is essential to
accountability and democratic legitimacy,” she concluded.”

** Market News International Washington Bureau: 202-371-2121 **

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