The unusually harsh winter weather appears to be
a contributing factor to the recent signs of weakness in the U.S. economy, said
Federal Reserve Chair Janet Yellen. She also said the Fed was on track to keep
paring its bond-buying stimulus program.
Testifying to the
Senate Banking Committee, Yellen said the Fed would watch carefully to ensure
weather was indeed the culprit, but she reiterated that it would take a "significant
change" to the economy's prospects for the Fed to put plans to wind down
its bond-buying program on hold.
Heavy snowstorms and
cold snaps have hit U.S. employment, retail sales and manufacturing. The
world's largest economy added fewer than 200,000 jobs combined in December and
January, well below expectations. Some investors think the Fed could alter its
plans if a report on February hiring next week shows similar weakness.
The Fed cut back on
its bond-buying program by $10 billion in each of the last two months, and it
expects to raise interest rates next year as long as the economic indicators
continue to improve.
Asked by New York
Senator Charles Schumer if the Fed would consider changing the rate of taper if
weather turned out not to be the main factor in recent economic weakness,
Yellen said the central bank would be open to reconsidering if the outlook
changed significantly.
The Fed has held
rates near zero since late-2008 and it has pumped up its balance sheet to more
than $4 trillion with its asset purchases. It is currently buying bonds at a
pace of $65 billion per month, and will decide its next move at a meeting on
March 18-19.
Another challenge on
the Fed's horizon is adjusting a policy promise, repeated last month, to keep
rates near zero until well after the U.S. jobless rate falls below 6.5 percent.
Unemployment was very close to that threshold at 6.6 percent in January, so Fed
policymakers have suggested they want to find another way to telegraph their
intentions.
"There is no
hard and fast rule about what unemployment rate constitutes full employment and
we need to consider a broad range of indicators," Yellen said.
"Many members of
the committee have emphasized this point and it's one I agree with," she
added. "It moves in the direction of qualitative guidance."