In testimony to Congress today, Fed Chairman Janet Yellen, in the flat tone and terms her gig demands lest investors freak out, indicated she wasn’t buying the idea that the phantom menace of inflation requires an end to stimulative measures and higher interest rates. Here are excerpts from the account by the New York Times‘ Binyamin Applebaum:
In her testimony, Ms. Yellen — reinforced by a separate report from the Fed — said that valuations of assets including junk bonds and shares in smaller tech companies appeared “stretched,” but that the Fed did not plan to curtail its economic stimulus campaign in response….
“Too many Americans remain unemployed, inflation remains below our longer-run objective and not all of the necessary financial reform initiatives have been completed,” Ms. Yellen told the Senate Banking Committee….
Ms. Yellen’s testimony suggested the Fed’s leadership remained largely unmoved by the arguments of some Fed officials and outside economists that monetary policy has done what it can to stimulate the economy, and that the Fed is in danger of risking excessive inflation in the future by waiting too long to start raising interest rates.
Bondholders hungry for higher returns will just have to stay hungry a while longer.