Yellen: Fed monitoring recent weaker economic data

Associated Press

WASHINGTON

Federal Reserve Chairwoman Janet Yellen noted Thursday that recent economic data have pointed to weaker-than-expected gains in consumer spending and job growth. She said the Fed will be watching to see whether the slowdown proves only a temporary blip caused by severe winter weather.

Yellen’s comments gave encouragement to Wall Street. Investors read the remarks as offering at least a hint that the Fed might slow or suspend a pullback in its economic stimulus if the economy faltered.

“We have seen quite a bit of soft data over the last month or six weeks,” Yellen said, citing job growth, housing, retail sales and industrial production.

She said the Fed needs to “get a firmer handle on exactly how much of that set of soft data can be explained by weather and what portion, if any, is due to a softer outlook.”

In her remarks to the Senate Banking Committee, Yellen repeated the Fed’s previous assurances that its pullback in its bond purchases is “not on a preset course” and could be modified if there was a “significant change” in the Fed’s outlook. The Fed is gradually reducing its monthly bond purchases, which have been intended to keep long-term loan rates low to encourage spending and growth.

Yellen said that though she was open to adjusting the pace of the Fed’s reductions in bond purchases, “I wouldn’t want to jump to conclusions” that such a change will be needed.

Still, investors took heart from her comment that the Fed was concerned about the weaker economic data and watching to see if the slowdown was temporary or persistent.