Federal Reserve Chairwoman Janet Yellen on Wednesday refused to detail a specific timeline for the central bank’s next interest rate hike despite pressure from Republican lawmakers.
Testifying before a House panel, Yellen said she expects stronger growth in the economy over the coming months, clearing the path for the Fed to wrap up its stimulus program sometime in the fall. But she declined to offer specifics on when the Fed might raise interest rates for the first time since the financial crisis.
Rep. Kevin Brady (R-Texas), chairman of the Joint Economic Committee, repeatedly tried to get Yellen to provide some detail on when the Fed would boost rates, but she sidestepped his efforts.
“The answer is that it depends on the evolution of the economy,” she said. “I’m afraid I can’t give you a timetable.”
But Brady accused the Fed of adopting a “don’t worry, be happy” approach, and noted that central bank officials have been wrong in the past.
“I believe we need more specifics and a clearer timetable,” he said.
For her part, Yellen said the runaway inflation of the 1970s was a “formative experience” for her and other top Fed officials, who are focused on avoiding a repeat.
“The lessons from that period are very real for all of us, and none of us want to make that mistake again,” she said.
Republicans have long been critical of the extremely accommodative policies the Fed adopted in 2008 and repeatedly pushed the bank to do more to guard against inflation by cutting stimulus and raising rates.
On Wednesday, Sen. Roger Wicker (R-Miss.) suggested the Fed was at least partly responsible for growing levels of economic inequality in the U.S. Citing a recent op-ed in The Wall Street Journal, Wicker said the low interest rates pushed by the Fed have had the result of “goosing” the stock market, further widening the gap between the lower and upper classes.
The stock market is flirting with all-time highs, but only about half of the country has investments in it.
Yellen conceded that interest rates do play a role in the stock market, but she said the Fed’s main goal is moving the entire economy along, which is good for everyone regardless of class. She said pushing lower interest rates has helped boost home prices, which are a major asset for middle-class Americans.
“So there have been benefits in this policy, in the policies we've pursued, for Main Street, as well as for those who hold equities in their portfolios,” she said.
Yellen opened the hearing with a fairly optimistic take on the U.S. economy, which she said was poised to make strong gains in the spring. However, she couched that prediction with concerns and questions about the recovery, which Yellen said needs continued support from the Fed.
“In light of the considerable degree of slack that remains in labor markets and the continuation of inflation below the committee’s 2 percent objective, a high degree of monetary accommodation remains warranted,” she said.
Yellen emphasized that while the Fed is shrinking the size of the monthly bond purchases that make up its stimulus efforts, it is still making purchases and holding on to bonds it already bought, placing “significant downward pressure” on interest rates.
She added that policymakers need to watch for any economic curveballs and said they are prepared to respond if necessary.
Despite those notes of caution, Yellen struck a positive tone on the economy going forward. She blamed a dismal 0.1 percent growth reported in the first quarter of the year on “mostly transitory factors” like a harsh winter.
Recent data points to a much rosier spring, and Yellen said she expects “solid growth” in the second quarter.
“A rebound in spending and production is already underway,” she said.
Despite the optimism, Yellen hit a note of caution on a recent slowdown on the housing front and said labor conditions remain “far from satisfactory.”
She added that there remains considerable uncertainty about the overall economic trajectory, and in particular cited trouble abroad from other economies as a “prominent risk.”
Updated at 1:43 p.m.