US Federal Reserve Chair Janet Yellen said on Thursday that the intense winter storms of the past two months have been one cause of the recent run of weak US economic data.
However, after several key indicators came in well below expectations since she last addressed the state of the economy, Yellen said that Fed policymakers were on the watch for any fundamental changes in the pace of growth.
“We have seen quite a bit of soft data over the last month or six weeks,” she told the US Senate banking committee.
“I think it’s clear that unseasonably cold weather has played some role in much of that,” she said.
“What we need to do and will be doing in the weeks ahead is to try to get firmer handle on exactly how much of that set of soft data can be explained by weather and what portion, if any, is due to softer outlook,” she said.
Since December and notably since Yellen expressed confidence in the economy’s health in an appearance at a US House of Representatives panel on Feb. 11, middling or weak data on job creation, retail sales, industrial production and the housing sector have surprised analysts.
While many have downplayed the disappointing indicators as the impact of severe storms, which shut down stores and discouraged companies from actively hiring, the persistence of the numbers has some worried that the economy is more broadly slowing.
Yellen said the Fed remained committed to tapering the stimulus, which it expects to wind up by late this year.
“If there’s a significant change in the outlook, certainly we would be open to reconsidering [the stimulus taper], but I wouldn’t want to jump to conclusions here,” she told the senate panel.
If there is a signficant change in the economic outlook from what the Federal Open Market Committee outlined in recent months, she said, the plan to taper the bond purchase program could be reconsidered.
Yellen, who became chair of the Fed on Feb. 1, confirmed that inflation remains well below the Fed’s 2 percent target, while unemployment remains a significant problem, despite the fall in the official jobless rate to 6.6 percent in January.
She said an “unusually high” portion of the fraction of the US labor force works part-time because full-time jobs are not available.
“That’s an additional 7 million-plus Americans who are involuntarily employed part-time. And we have unusually high fraction of Americans who are unemployed and have been for substantial amounts of time,” she added.
Asian markets were mixed yesterday after Yellen provided an upbeat view of the US economy and hinted the bank could ease up on its stimulus taper if the growth outlook weakens.
Tokyo lost 0.55 percent, or 82.04 points, to end at 14,841.07 owing to the stronger yen, while Sydney was off 0.12 percent, or 6.6 points, at 5,404.8. Seoul was flat, nudging up 1.56 points to 1,979.99. Hong Kong inched up 0.03 percent, or 8.78 points, to 22,836.96, while Shanghai rose 0.4 percent, or 8.95 points, to 2,056.30.
Analysts said her hint that the taper could be flexible and her stronger statement that unemployment remains a big problem, suggest less of a determination to push ahead with policy tightening than was evident a few months ago.
“The jury is still out on whether the cold weather is to blame... but [stock] markets’ interpretation of Yellen’s comments was positive,” SMBC Nikko Securities general manager of equities Hiroichi Nishi said.