Yellen: Winter weather slowed economy

Federal Reserve Chairwoman Janet Yellen warned senators Thursday that unseasonably cold weather may have slowed the economy recently, but the Fed was not ready to slow down its stimulus exit.

Testifying before the Senate Banking Committee, Yellen noted that in the last few weeks “a number of data releases have pointed to softer spending.”

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Some analysts have argued that the recent cold snap that hit much of the country could be a culprit, and Yellen agreed. But how much of a factor it was is still a question the Fed is trying to figure out, and will play a key factor in determining whether the central bank sticks with its plan to wind down its stimulus efforts.

“Part of that softness may reflect adverse weather conditions, but at this point it’s difficult to discern exactly how much,” Yellen said, in a departure from her prepared testimony.

For the last several months, the Fed has sought to wind down the size of its monthly bond purchases as the economy continues to improve. Fed officials have emphasized that those reductions are not on a set course, and could be altered if the economy does not improve as expected.

The recent run of disappointing economic data, including a pair of poor jobs reports, has led to some speculation the Fed could consider hitting the brakes.

But Yellen said it was not yet time to jump to conclusions, and that the Fed first needs to sort out what role the winter weather played in the matter.

“What we need to do, and will be doing in the weeks head, is try and get a firmer handle on exactly how much that set of soft data can be explained by the weather,” she said.

But she added that if the weak data was discovered not to be due to weather, the Fed would “be opening to reconsidering” the pace of its exit.

Yellen’s testimony before the Senate panel marked her first since being sworn in as the first female head of the central bank. Like her predecessor, Ben Bernanke, Yellen faced Republicans skeptical of the Fed’s efforts to boost the economy, and Democrats urging her to do more.

She added in her testimony that she was particularly concerned about the plight of long-term unemployed workers. Yellen said the level of long-term unemployed that make up the nation's jobless is at an "unprecedented" level, and nudged Congress to adopt policies to address their needs.

The issue contains "extremely disturbing trends with very significant implications for our country," she added.