Chair Yellen's prepared remarks are almost the same as before the House. Fed Chair Yellen stated that taper is likely to continue at a measured pace but also stated that the pace is dependent on progress in the labor market and economy overall. She noted that the fed funds rate is likely to remain low even after the unemployment rate dips below 6.5 percent. A new comment is that weather effects on economic data are to be weighed. The Chair said that low inflation allows the Fed to promote full employment with continued accommodative monetary policy for quite some time. On the issue of 6.5 percent unemployment, it is not the FOMC's definition of full employment but a trigger for discussion for change in policy.
Taper is expected to conclude this fall. She sees the Fed of having no intention of quickly winding down its portfolio—it would be slowly and likely without sales. Yellen sees that eventual tightening can take place without portfolio sales. On the issue of the Fed's experimental reverse repos facility, the idea is to control short term interest rates. Yellen says it is some off for boosting rates. She stated this would give more control than with interest on reserves alone. She considers current exercises as prudent planning.
The Chair acknowledged that economic data have been soft over the last four to six weeks but weather has played role. She stated that the Fed will be weighing the impact of weather. Taper is still data dependent. Pause in taper is possible if there is a significant change in the outlook.
Regarding a question of the impact of restrictive fiscal policy, Yellen noted that fiscal policy has cut into economic growth. She agrees with her predecessor that in the long run, fiscal policy should be balanced but in the short run do no harm to the economy.
Yellen indicated that the Fed does not have the tools to affect long-term unemployment. However, she said that the Fed is very worried about inequality trends.
Regarding Bitcoin, Yellen indicated that it is outside the authority of the Fed to regulate (as a nonbank entity) but she said is appropriate for Congress to consider regulation and perhaps set up a supervisory regime. Yellen indicated that the Fed is researching issues and is willing to share findings.
Overall, Chair Yellen confirmed that taper is still on track for measured steps in reduction. However, data have been soft recently and the Fed will weigh how much the impact of adverse weather may have been.