Yellen upbeat on US economy despite report

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Federal Reserve Chairwoman Janet Yellen on Tuesday joined a chorus of economists downplaying a Commerce Department report that found a 2.9 percent reduction in first quarter GDP growth.

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During her semiannual report to Congress, Yellen described the first quarter GDP reduction last month as "transitory." Yellen noted that unemployment has continued to decline, to 6.3 percent, and that the U.S. labor market has added more than 200,000 jobs in the last three months.

"I do think that the negative number substantially understates the momentum in the economy," Yellen said. "Indicators of consumer sentiment and business sentiment and optimism also seem to be positive. ... My overall view is more positive."

Most economists expect the Fed to increase interest rates early next year, which Yellen noted. As expected, she did not get locked into a timetable for when the Fed would raise interest rates.

“It will depend on the progress of our economy and how we assess it based on a variety of indicators,” Yellen said in response to a question from Senate Banking Committee ranking member Mike Crapo (R-Idaho).

"Since the February Monetary Policy Report, further important progress has been made in restoring the economy to health and in strengthening the financial system," Yellen said. "Yet too many Americans remain unemployed, inflation remains below our longer-run objective, and not all of the necessary financial reform initiatives have been completed."