WASHINGTON — Federal Reserve Vice Chair Janet Yellen will not give many clues as to distinctions between her and current Chair Ben Bernanke when she testifies before Congress Thursday morning, but she does pledge to continue the work of the central bank to "promote a more robust recovery."
In testimony prepared for the hearing in front of the Senate Banking Committee, Yellen says, the Federal Reserve is "using its monetary policy tools to promote a more robust recovery."
"A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases," Yellen says in the written statement. "I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy."
Yellen, who has served as vice chair since 2010, points to progress in the labor market with the economy creating "7.8 million jobs since the post-crisis low for employment in 2010." Still, she says "at 7.3 percent in October, it is still too high, reflecting a labor market and economy performing far short of their potential."
As for the second half of the Fed's dual mandate of price stability, Yellen says "inflation has been running below the Federal Reserve's goal of 2% and is expected to continue to do so for some time."
Yellen praises Bernanke's leadership in the prepared remarks, saying "Under the wise and skillful leadership of Chairman Bernanke, the Fed helped stabilize the financial system, arrest the steep fall in the economy, and restart growth."
Yellen, who chaired a FOMC subcommittee on communication, reiterated her commitment to transparency. "I strongly believe that monetary policy is most effective when the public understands what the Fed is trying to do and how it plans to do it," she said.
As part of this efforts, the Fed adopted a statement of the Federal Open Market Committee's longer-run objectives, including a 2 percent goal for inflation. "I believe this statement has sent a clear and powerful message about the FOMC's commitment to its goals and has helped anchor the public's expectations that inflation will remain low and stable in the future," Yellen said.
"I have strongly supported this commitment to openness and transparency, and will continue to do so if I am confirmed and serve as Chair," she said.
Yellen is widely tipped to win confirmation in the Senate despite Republican efforts to delay or hold up voting. While her prepared remarks were mostly benign, her answers to questions from Senators tomorrow will be watched closely by markets for signs of her commitment to the Fed's easy money policy.
She will likely be quizzed about the Fed's efforts to reign in financial market risks following the Great Recession and implementing financial regulations that were authorized under Dodd-Frank Act.
She says in the prepared remarks that today "banks hold more and higher-quality capital and liquid assets that leave them much better prepared to withstand financial turmoil" and points to the stress tests bank have to undergo as a way to ensure they have enough capital to endure rough patches.
"We have made progress in promoting a strong and stable financial system, but here, too, important work lies ahead," Yellen said. "I am committed to using the Fed's supervisory and regulatory role to reduce the threat of another financial crisis."
She goes on to say the Fed "should continue to limit the regulatory burden for community banks and smaller institutions, taking into account their distinct role and contributions."
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