Yellen says Fed’s ‘extraordinary commitment’ still needed

WASHINGTON -- Federal Reserve Chairwoman Janet Yellen, saying the job market is far from normal, made clear Monday that the central bank remains committed to providing extraordinary support for the economy for some time to come.

Yellen’s remarks in Chicago were meant to reassure investors and others after statements earlier this month that indicated the Fed might start raising short-term interest rates as soon as early next year – sooner than many had been expecting.

“She is backtracking some from her hawkish-sounding remarks from the press conference a couple weeks ago,” said Jack Ablin, chief investment officer of BMO Private Bank in Chicago. “This suggests they’re not going to turn on the tightening [of monetary policy] any time soon.”

Yellen also used the occasion of her first public speech since becoming the Fed chief two months ago to cast the data-crunching, marble-headquartered institution in a softer light. She noted that the Fed’s goal is to help Main Street, not Wall Street. To buttress this point, she laced her remarks with anecdotes about real workers still struggling to recover from the Great Recession, something her predecessor, Ben S. Bernanke, rarely did.

“They are a reminder that there are real people behind the statistics,” she said at a community reinvestment conference in Chicago.

Yellen told the stories of three workers to illustrate how the labor market was far from healthy. One worker, she said, was enduring long-term unemployment. Another was struggling to recover his earning power and a third, a woman in the food industry, was among the millions who are now working part-time because she can’t get more hours.

Yellen cited these cases to point out the large slack in the labor market, meaning there are “significantly more people willing and capable of filling a job than there are jobs for them to fill.”

The latest unemployment rate is 6.7%, but Yellen and most of her colleagues at the Fed think that the nation can sustain a jobless figure of 5.2% to 5.6% without putting undue pressure on inflation.

The Fed has sought to help the job market by trying to boost economic growth by buying bonds to hold down long-term interest rates and through its main tool: controlling short-term interest rates, which have been pinned down near zero since late 2008.

Since the start of this year, the central bank has been cutting the amount of its bond purchases, but Yellen said Monday that the Fed was keen on continuing to help grow the economy.

“I think this extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policymakers at the Fed,” she said.