WASHINGTON — The Republicans said the Federal Reserve was secretive, ineffective and out of touch with the economic realities of ordinary Americans.
The Democrats showered its policies with encomiums like “herculean.”
And those were just the opening statements on Wednesday, as the Fed’s chairwoman, Janet L. Yellen, began two days of biannual testimony on Capitol Hill.
Ms. Yellen functions as the nation’s economic weatherwoman, and on Wednesday, she sounded more worried than at her last public appearance, in December. Convulsions in financial markets, it seems, could restrain economic growth.
“Financial conditions in the United States have recently become less supportive of growth,” she told the House Financial Services Committee. “These developments, if they prove persistent, could weigh on the outlook for economic activity.”
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But Ms. Yellen said it was too soon to assess any damage, and she suggested that it was also too soon to say whether the Fed would raise interest rates in March. By REUTERS 1:41 Yellen on International Threats to Economy Continue reading the main storyVideo Yellen on International Threats to Economy Janet L. Yellen, the Federal Reserve chairwoman, said during a biannual report to Congress that foreign economic developments could pose a risk to American economic growth. By REUTERS on Publish Date February 10, 2016. Photo by Drew Angerer for The New York Times. Watch in Times Video » Embed Share Tweet “Let’s remember that the labor market is continuing to perform well,” she said. “We want to be careful not to jump to a conclusion about what is in store for the economy.” The Fed raised short-term interest rates in December for the first time since the financial crisis. It started small, ending a seven-year period in which it held rates near zero by raising rates to a range from 0.25 percent to 0.5 percent. Low rates aim to encourage borrowing and taking risks, and the Fed said it planned to gradually curtail those incentives as the economy gains strength. The Fed indicated in December that it planned to raise rates four times during 2016, beginning in March, but some analysts now expect that the Fed will not move before June. Like predicting the weather, gauging the health of the economy has proved challenging. Equity markets have tumbled on concerns about global growth. Interest rates have increased for riskier borrowers even as investors accept negative rates on a growing share of global debt, essentially paying to move their money into safe havens. And the relative strength of the American economy has continued to drive up the dollar, rendering imports cheaper for American consumers but weighing on American exporters. The question now confronting the Fed is whether the United States can continue to post exceptional, if modest, growth while much of the rest of the world struggles. Ms. Yellen in her remarks highlighted the strength of the labor market, describing “solid improvement” over the last half-year. The unemployment rate fell to 4.9 percent in January, from 5.7 percent in January 2015, and the economy added an average of 222,000 jobs a month over the previous year. “Ongoing employment gains and faster wage growth should support the growth of real incomes and therefore consumer spending,” Ms. Yellen said. She also suggested, ever so gently, that investors were not behaving rationally, suggesting that markets might rebound. While global economic and financial conditions have taken a turn for the worse, “we have not seen shifts that seem significant enough to have driven the sharp moves that we have seen in markets,” she said. Advertisement Continue reading the main story Advertisement Continue reading the main story Members of both parties challenged Ms.
The Democrats showered its policies with encomiums like “herculean.”
And those were just the opening statements on Wednesday, as the Fed’s chairwoman, Janet L. Yellen, began two days of biannual testimony on Capitol Hill.
Ms. Yellen functions as the nation’s economic weatherwoman, and on Wednesday, she sounded more worried than at her last public appearance, in December. Convulsions in financial markets, it seems, could restrain economic growth.
“Financial conditions in the United States have recently become less supportive of growth,” she told the House Financial Services Committee. “These developments, if they prove persistent, could weigh on the outlook for economic activity.”
Continue reading the main story
RELATED COVERAGE
News Analysis: Conflicting Economic Indicators Challenge Fed’s Policy MakersFEB. 5, 2016
What Happens When the Fed Raises Rates, in One Rube Goldberg MachineDEC. 16, 2015
Toxic Loans Around the World Weigh on Global GrowthFEB. 3, 2016
Wages Rise as U.S. Unemployment Rate Falls Below 5%FEB. 5, 2016
Fed Raises Key Interest Rate for First Time in Almost a DecadeDEC. 16, 2015
Economic Scene: The Dollar Keeps Rising, for Good or EvilJAN. 26, 2016
But Ms. Yellen said it was too soon to assess any damage, and she suggested that it was also too soon to say whether the Fed would raise interest rates in March. By REUTERS 1:41 Yellen on International Threats to Economy Continue reading the main storyVideo Yellen on International Threats to Economy Janet L. Yellen, the Federal Reserve chairwoman, said during a biannual report to Congress that foreign economic developments could pose a risk to American economic growth. By REUTERS on Publish Date February 10, 2016. Photo by Drew Angerer for The New York Times. Watch in Times Video » Embed Share Tweet “Let’s remember that the labor market is continuing to perform well,” she said. “We want to be careful not to jump to a conclusion about what is in store for the economy.” The Fed raised short-term interest rates in December for the first time since the financial crisis. It started small, ending a seven-year period in which it held rates near zero by raising rates to a range from 0.25 percent to 0.5 percent. Low rates aim to encourage borrowing and taking risks, and the Fed said it planned to gradually curtail those incentives as the economy gains strength. The Fed indicated in December that it planned to raise rates four times during 2016, beginning in March, but some analysts now expect that the Fed will not move before June. Like predicting the weather, gauging the health of the economy has proved challenging. Equity markets have tumbled on concerns about global growth. Interest rates have increased for riskier borrowers even as investors accept negative rates on a growing share of global debt, essentially paying to move their money into safe havens. And the relative strength of the American economy has continued to drive up the dollar, rendering imports cheaper for American consumers but weighing on American exporters. The question now confronting the Fed is whether the United States can continue to post exceptional, if modest, growth while much of the rest of the world struggles. Ms. Yellen in her remarks highlighted the strength of the labor market, describing “solid improvement” over the last half-year. The unemployment rate fell to 4.9 percent in January, from 5.7 percent in January 2015, and the economy added an average of 222,000 jobs a month over the previous year. “Ongoing employment gains and faster wage growth should support the growth of real incomes and therefore consumer spending,” Ms. Yellen said. She also suggested, ever so gently, that investors were not behaving rationally, suggesting that markets might rebound. While global economic and financial conditions have taken a turn for the worse, “we have not seen shifts that seem significant enough to have driven the sharp moves that we have seen in markets,” she said. Advertisement Continue reading the main story Advertisement Continue reading the main story Members of both parties challenged Ms.