Yellen strongly defends easy Fed policies, cites U.S. labour slack

Federal Reserve Chair Janet Yellen, on Monday said that given the halting pace of the recovery and a still moribund job market, the Federal Reserve will continue to bolster the U.S. economy

She also gave a strong defence of the central bank’s easy-money policies on Monday, saying its “extraordinary” commitment to boosting the economy, especially the still struggling labour market, will be needed for some time to come.

In her first public speech since becoming Fed chair two months ago, Yellen cited the struggles of three American workers in backing the policies of low interest rates and continued bond-buying. She said there remains

“considerable” slack in the economy and job market, a sign that further monetary stimulus can still be effective, Reuters reports.

In some ways, labor conditions are tougher now than in any other recession, said Yellen at a speech in Chicago. She also stated that the Fed's "extraordinary commitment," in the form of massive bond-buying and ultra-low interest rates, is "still needed, and will be for some time."

“I think this extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policy-makers at the Fed,” Yellen said at a community reinvestment conference.

Investors  closely  watched  Yellen's speech for comments on interest rates. During her first news conference following the Fed's Open Market Committee (FOMC) rate decision, traders were surprised  by the suggestion of an earlier-than-anticipated increase in rates. She hinted that a rate hike could come as soon as next year, but Monday's speech tempered that idea.

The Fed, frustrated with the slow recovery from the 2007-2009 recession, has kept rates near zero for more than five years. It has said it will keep them there for a considerable time even after it ends a bond-buying programme, which is to be wound down later this year.

In a speech that sounded political at times, Yellen, long concerned with the hardships of the unemployed and under-employed, said the U.S. economy remains “considerably short” of the Fed’s goals of maximum sustainable employment and stable inflation at 2 percent.

The “scars from the Great Recession remain, and reaching our goals will take time,” she told about 1,100 people gathered at a downtown convention center here. “The recovery still feels like a recession to many Americans, and it also looks that way in some economic statistics.”