The tapering of the $85 billion quantitative easing is here to stay?
Speaking to lawmakers on the House Financial Services Committee on Tuesday, new Federal Reserve Chair Janet Yellen reaffirmed her commitment to her predecessor’s, Ben Bernanke, monetary policy strategy, including the tapering of the bond-buying initiative.
Yellen confirmed that she would not make any sudden abrupt changes to United States monetary policy and to continue winding down the monthly stimulus, though she did note that the U.S. labor market recovery is still “far from complete.”
The new Fed head stated that she still supports Bernanke’s approach, which she helped build when she was the central bank’s vice-chair. Under Bernanke’s two terms, the central bank grew its balance sheet to more than $4 trillion and it is expected to hit $6 trillion in the next few years. Under Yellen, the Fed will now purchase $65 billion in Treasuries and mortgage bonds each month in an attempt to maintain low borrowing costs across the national economy and to encourage investment and hiring in the private sector.
Despite the influx of negative economic data, Yellen alluded Monday of the uptake in business and consumer spending. She also recognized the Fed’s regulatory responsibilities. “The work of making the financial system more robust has not yet been completed,” said Yellen.
Due to the paucity of intensive job growth and the crisis occurring in the emerging markets, Yellen confirmed that the Fed is watching the market volatility quite closely. Many argue that this hit to the market could hinder future plans for the Fed.
“Our sense is that at this stage these developments do not pose a substantial risk to the U.S. economic outlook,” she added. “We will, of course, continue to monitor the situation.”
Fed critics argue that the Fed will likely increase QE in the future because the U.S. stock market and parts of the global economy rely on the monthly injection of stimulus. Peter Schiff, president of Euro Pacific Capital, has mentioned this numerous times since the summer, when it was believed the Fed would begin to taper.
“What is Janet Yellen going to do to try to revive the economy? There’s only one thing she can do, and that’s print even more money,” explained Schiff.
In the end, whatever the case may be regarding QE, it can be agreed upon that it has been a “complete failure.”