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Federal Reserve chair says U.S. economic recovery is still incomplete

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By Howard Schneider and Michael Flaherty

WASHINGTON, (Reuters) – The U.S. economic recovery remains incomplete, with a still-ailing job market and stagnant wages justifying loose monetary policy for the foreseeable future, Federal Reserve Chair Janet Yellen told a Senate committee on Tuesday.

In a strong defense of the central bank’s current stance, Yellen said that early signs of a pickup in inflation aren’t enough for the Fed to accelerate its plans for raising interest rates, a move currently expected in the middle of next year.

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That could change, with interest rates rising sooner and faster, if data show labor markets improving more quickly than expected, she said.

But as it stands, “although the economy continues to improve, the recovery is not yet complete,” Yellen said in semi-annual testimony before the Senate Banking Committee, repeating her focus on lagging labor force participation and weak wage growth as key to any conclusions about the economy’s health.

“Too many Americans remain unemployed,” Yellen said.

Yellen presented a broad overview of an economy still in transition from the 2007-2009 economic crisis. In an accompanying report, the Fed said its balance sheet would top out at $4.5 trillion when its bond-buying program ends in October, a sign of how much stimulus the central bank has had to unleash to support the economy.

With another $2.6 trillion held in reserve by banks, the report said it “will not be feasible” for the Fed to rely on the traditional Fed Funds market to manage interest rates – a judgment implicit in its recent work on new interest rate tools.

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In her remarks, Yellen said the economy continues to generate jobs and steady growth. But she said Fed policymakers currently expect their preferred measure of inflation to stand at between 1.5 percent and 1.75 percent for 2014, short of the central bank’s 2 percent target. The housing market remains weak, Yellen said, and business investment less than hoped.

Thriving equity and security markets have raised concerns of a possible bubble, but Yellen said that the values of stocks, bonds and other assets “remain generally in line with historic norms.”

Fed chairs are mandated by law to report to Congress twice a year on monetary policy, and the hearing on Tuesday is Yellen’s second such appearance. Her first turned into a marathon grilling about her philosophy and views of the economy.

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The Fed faces a complex agenda as it weans the U.S. economy from the massive stimulus programs put in place to fight the financial crisis.

Economic data has kept Fed policymakers relatively upbeat that the economy will make steady progress towards the central bank’s goals.

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But there is also the potential for serious division.

Some policymakers worry the Fed is falling behind the curve on rate hikes and that Yellen is taking too much of an impromptu approach to the interest rate decision. In her prepared testimony, she held firm to her view that low labor force participation and other labor market statistics are evidence of slack that needs to be absorbed by stronger job growth, not just a sign of unavoidable demographic change.

For now, a more dovish approach holds sway at the central bank, with several officials saying they’d tolerate inflation higher than the 2 percent target for a period of time in order to ensure growth is on track, wages are rising, and as many workers as possible have been drawn back into jobs.

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(Reporting by Howard Schneider; Editing by Paul Simao)


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Trump team ‘is as incompetent, shambolic, paranoid, and given to conspiracy theories as it appears’: MSNBC panel

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In a Sunday evening panel discussion, MSNBC commentators explained that the White House appears to be just as chaotic and marred by chaos as the rumors say.

Many in the White House learned that the president's lawyer, Rudy Giuliani, was working overseas in Ukraine. Giuliani claimed that he's been producing a film that he couldn't get Fox News to run, as it will appear on the fringe network OAN.

"What Rudy Giuliani is doing is using Kremlin-manufactured propaganda as a defensive shield for the president," said CNBC's John Harwood. "Fiona Hill was unambiguous in her testimony to the intelligence committee. What Rudy Giuliani has been doing with these two indicted men who are linked to a Russian oligarch who is tied to Russian organized crime, is trying to manufacture a story that Ukraine, rather than Russia or in addition to Russia or differently from Russia, meddle in the campaign. That is false."

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Watch Devin Nunes freak out and eject reporters when asked about phone calls with Lev Parnas

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Rep. Devin Nunes (R-CA) lost it over the weekend when he was asked about his phone calls with Rudy Giuliani's associate Lev Parnas, who was recently indicted.

Nunes was at a Republican Party fundraiser in New York City when two Intercept reporters asked about the impeachment probe. Recent phone records subpoenaed by the House Intelligence Committee revealed that Nunes had multiple conversations with Giuliani and with Parnas.

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Trump supporters lose their minds when church shows Nativity scene in immigrant cages

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MAGA supporters are losing their minds after a photo of the Nativity scene at Claremont United Methodist Church was posted to Facebook.

The scene depicts Mary, Joseph, and the baby Jesus separated and put in their own cages, a reference to the families separated at the U.S.-Mexico border. Inside the church, the family is shown as reunited.

Senior minister Karen Clark Ristine shared the image on Facebook with the message hoping that everyone in the United States could see the photo and read the story for Christmas.

"The theological statement posted with the nativity: In a time in our country when refugee families seek asylum at our borders and are unwillingly separated from one another, we consider the most well-known refugee family in the world," she wrote. "Jesus, Mary, and Joseph, the Holy Family. Shortly after the birth of Jesus, Joseph and Mary were forced to flee with their young son from Nazareth to Egypt to escape King Herod, a tyrant. They feared persecution and death."

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