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Federal Reserve Chair Janet Yellen confirms no change to policy

Soon after Ben Bernanke finished his second term as head of the Federal Reserve, Chair Janet Yellen delivered testimony to the Financial Services Committee of the United States House of Representatives on Monday in which she confirmed that there would be no change to the Federal Open Market Committee’s (FOMC) monetary policy.

The former vice-chair, who helped construct the current monetary structure, including the $85 billion bond-buying program known as quantitative easing, stated that much more work is needed to bring stability to the labor market. Yellen reaffirmed the central bank’s commitment to scaling back its QE initiative.

Yellen reiterated the Fed’s optimistic assessment on the U.S. economy and the notion that economic growth will increase this year, despite the wave of recent economic reports that shed a negative light on the nation’s overall economy, such as the paucity of real job growth.

The new Fed Chair alluded to the fact that business and consumer spending has been on the rise.

In addition, Yellen noted of the Fed’s regulatory responsibilities: “The work of making the financial system more robust has not yet been completed.”

On the matter of emerging markets, Yellen downplayed any concerns that the financial community maintains regarding the volatility in places such as Turkey, which has been affected by the Fed’s $20 billion tapering.

The currency market persisted in its restraining state after the downbeat U.S. labor market report, though the Norwegian Krone was one of the biggest gainers in foreign exchange markets Monday as it rose to a near four-week high of SEK1.0579 against the Swedish krona and ticked up around one percent against the euro to hit NOK8.3489. This is positive data for domestic financial institutions, such as www.toppfinans.com.

Yellen is scheduled to respond to questions from the House committee Tuesday and then testify before a Senate committee Thursday.

Finance experts argue that Yellen is essentially “sticking to the script” and not going by her own playbook.

“I think it’d be naive to someone to think she was going to go out on her own and do what she wants,” John Canally, an economic strategist at LPL Financial Corp. said in a phone interview from Boston with Bloomberg News. “Yellen is just sticking to the script and she’s going to give it to the next FOMC meeting to taper.”

Following her remarks, U.S. stocks inched upwards: the Dow Jones Industrial Average shot up 40 points, the Standard & Poor’s 500 Index higher for the fourth straight trading day by rising 0.3 percent to 1,805.15. Sprint Corp. jumped 7.1 percent, CVS Caremark Corp. increased 2.6 percent and InvenSense Inc. received an 11 percent boost.

“Her testimony is the big event of the day,” Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC, told the Wall Street Journal. “I anticipate a lot of market volatility as she speaks and answers question.”