Fed should press on with QE amid limited risks: Yellen
Federal Reserve Vice Chairman Janet Yellen said the Fed should press on with $85 billion in monthly bond buying while tracking possible costs and risks from the unprecedented program.
“Turning to the potential costs of the Federal Reserve’s asset purchases, there are some that definitely need to be monitored over time,” Yellen said Monday in a speech in Washington. “At this stage, I do not see any that would cause me to advocate a curtailment of our purchase program.”
“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,” Yellen said in the text of remarks to the National Association for Business Economics annual policy conference, extending a debate on the Federal Open Market Committee about when to taper the bond buying to avert excessive risk taking.
Fed Governor Jeremy Stein said last month that some credit markets, including leveraged loans and junk bonds, show signs of overheating. Kansas City Fed President Esther George has warned that prices of some farm land have hit “historically high levels.”
“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.
She also said that ending the Fed’s bond-buying too soon could dampen the outlook for growth. “Ending asset purchases before observing a substantial improvement in the labor market might also create expectations that the amount of accommodation provided would not be sufficient to sustain the improvement in the economy,” Yellen said.