nb_cid nb_clickOther -tt-nb this.style.behavior='url(#default#homepage)';this.setHomePage('http://www.aol.com/?mtmhp=acm50ieupgradebanner_112313 network-banner-empty upgradeBanner
Search AOL Mail
AOL Mail
AOL Favorites

Weather seems to blame for U.S. slowdown, Fed's Yellen says

(Reuters) - Unusually harsh winter weather appears to be behind recent signs of weakness in the U.S. economy, Federal Reserve Chair Janet Yellen said on Thursday, suggesting the central bank was poised to press forward in ratcheting back its stimulus.

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 economyadded 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.

"It's really quite a range of data that has been soft recently. I think it's clear that ... unseasonably cold weather has played some role in much of that," Yellen, the Fed's former vice chair who took the reins on February 1, told lawmakers.

"What we ... will be doing in the weeks ahead is to try to get a firmer handle on exactly how much of that set of soft data can be explained by weather and what portion, if any, are due to a softer outlook," she said.

After more than five years of ultra easy monetary policy in the wake of the 2007-2009 recession, the Fed is taking the first small steps towards a more normal footing. It trimmed its bond buying by $10 billion in each of the past two months, and it expects to raise interest rates some time next year as long as the economy continues to improve.

Yellen reiterated her concerns about possible asset price bubbles, and suggested the Fed would move to a more qualitative description of when it plans to finally raise rates.

But her most revealing comments were on the bond purchases, which she said the Fed still intended to end sometime in the fall, although they were not on a "preset course."

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.

"But I wouldn't want to jump to conclusions here," she said.

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.

Reaction in financial markets was muted, with U.S. stocks gaining ground and the dollar drifting lower against the euro.

"I think the prevailing wisdom remains that there is a high hurdle to deviating from the current $10 billion per meeting taper trajectory," Stephen Stanley, chief economist at Pierson Securities, wrote to clients.


Senators on the committee also asked about financial regulation and the possibility that the accommodative monetary policy could inflate asset-price bubbles.

Yellen acknowledged that such low borrowing costs "can give rise to behavior that poses threats to financial stability."

"Therefore we need to be looking at that very carefully and we are doing so in a very thorough way," she said.

The debate is heating up over whether the Fed should stand ready to raise rates earlier than expected to head off risky behavior that could imperil financial stability.

The central bank is monitoring the growth of credit and leverage for "potential worrisome trends," Yellen said.

"I would say at this stage I don't see concerns, but there are pockets of a few things that we've identified that do concern us," she said.

"For example, underwriting standards and leveraged lending clearly appear to be deteriorating. We have addressed that with supervisory guidance and special exams and will continue to be very vigilant in that area."

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."

(Additional reporting by Lucia Mutikani, Ann Saphir, Elvina Nawaguna and Bill Trott; Editing by Chris Reese, Tim Ahmann and Andrea Ricci)

Join the discussion

1000|Characters 1000  Characters
dkdukei945 February 28 2014 at 10:55 AM

It's not difficult, the consumer is spending 6.3 million dollars more a day on gasoline then they were 6 or 7 yrs. ago. This kind of money coming out of our economy every single day is not helping matters. You would think someone that is as well educated at Yellen could recognize that. Domestic oil production is down 13% under Obama. It's not a big mystery. Dont pull the race card out on me, it won't work, I don't like the white half of him either.

Flag Reply +10 rate up
1 reply
barackhusseinobamakillingamerica dkdukei945 February 28 2014 at 11:00 AM

You know what --- THAT's a Good point....
When Obama took office gas was $1.89 per gal.
I just 1/2 filled up and paid $3.49 per gal..!
Then add in the doubled cost of health insurance
and increased other taxes, regulations
and beat-down of business by this President.
One might say - Barack Hussein Obama is Killing America...

Flag Reply +7 rate up
TEXVOODOO2 February 28 2014 at 11:19 AM

Yes, blame any and everything except Obama and his disasterous policies. Sorry lady, I don't think people are buying your excuses anymore. It's time to put the blame where it rightfully belongs, with Obama. He is to blame, along with the Democrats in Congress, who have rubber stamped every single piece of legislation he has called for. The responsibility rests squarely on their shoulders.

Flag Reply +5 rate up
omwhat February 28 2014 at 10:20 PM

Give me a break.....we still have to eat, drive, pay our taxes and up here in the north buy fuel to heat our homes......................It's The economy STUPID and lack of SHOVEL READY JOBs.
No one I know has any discretionary income to spend.
This is more horse pucky.
Must be something in the water they drink that causes the SPIN or out right LIES.

Flag Reply +5 rate up
weikamis February 28 2014 at 8:03 PM

LMAO:) I do not blame the weather......I blame all of the side-effects of these medications that those we American Citizens permit to run our government!:)

Flag Reply +3 rate up
Iselin007 February 28 2014 at 8:01 PM

The BLS doesn't ask Employers the legal status of their workers but it's ok to give unemployment figures for American citizens based on that tainted data!

Flag Reply +2 rate up
kvave February 28 2014 at 11:35 AM

Yes thats it. NOT the Exportation of Manufacturing. NOT these BS Short Term Contract Jobs designed to lay you off after three months as a gap filler. NOT the ever expanding H1 B Visa programs for Foreign and Illegal Labor


Flag Reply +6 rate up
posthuf February 28 2014 at 11:44 AM

Always "global warming," "global cooling," "climate change," "the amount of rain, snow or bright, sunny days" NEVER policy that is the cause of economic failure under this batch.

Now if Bush, or ANY Republican was in charge ...

Flag Reply +3 rate up
tortugatommie February 28 2014 at 11:44 AM

Shows how dumb I am. I thought it might be the intentional
de-industrializing (impoverishing) of America. You know, NAFTA, GAT, ETC.
Living wage jobs are STILL being exported to slave wage countries.
I also thought the arctic weather was due to "global warming".
Is The Federal Reserve a government agency or a private, for profit corporation?

Flag Reply +7 rate up
davmusgro February 28 2014 at 11:45 AM

Yeah right !!!! Wake up people ,its the policy that is in place There are now over 26 million people unemployed .More jobs have left to off shore and now over 50 million people in America are having trouble finding enough food. Here is a good stat 50% of the homeless are vets The economy is bab because of policy You can't keep giving billions to terrorist groups and drug cartels and help your own people You can't give hundreds of millions to Hollywood and expect to feed the needy The list goes on and on yet no complains Why is that They did when bush was in yet now its much worse and not a word. Oh I did not like bush

Flag Reply +3 rate up
mclark2960 February 28 2014 at 11:46 AM

what a crock

Flag Reply +4 rate up
aol~~ 1209600



World Series

More From Our Partners