Economic condition and possible fed actions in the future. You look like nervous. Im much more nervous, like yeah. Yeah. At work it will be eight or nine days away, but it can happen any time. I hope so. Im better than that. Lets talk about schedules. The committee will come to order without objection and they declare a recess of the committee at any time. All members will have five legislative days within which to submit extraneous material to the chair for inclusion in the record. The hearing is for the purpose of receiving the semiannual testimony and the board of governors on the Federal Reserve system on Monetary Policy and the state of the economy. I now recognize myself for three minutes to give an opening statement. Since we last convened to take chair yellens on Monetary Policy, headline remains low as does inflation, but the headline Unemployment Rate still rests too much on an incredibly low Labor Participation rate and regrettably high disability payment Participation Rate. Both paychecks and savings for working Americans Still have considerable room to grow after eight years of distortionary Economic Policy under the Previous Administration. Fortunately, on the fiscal front, help is on the way. House republicans have passed both the American Health care act to lift the burden of obamacare from our economy and the financial choice act to End Bank Bailouts and unleash trillions of dollars of capital sitting on the economic sidelines due to dodd frank. These are landmark pieces of legislation. In the months to come the house will vote on a fairer, flatter more competitive tax code that will undoubtedly bring us a far healthier and dynamic economy and the Trump Administration is busy rolling back rules that harm our economy, as well. Monetary policy must, of course, do its part as well. I am highly encouraged that chair yellen and her colleagues seem to be on track toward some kind of Monetary Policy, and giving Interest Rates artificially low for too long was a key contributing factor to the last crisis. Let us hope it does not prove to be a key, contributing factor to the next. What is most desirable for longterm Economic Growth is for the fed to set out an easily discernible and transparent policy strategy to achieve its mandate and for highly exgent circumstances to stick to it. The fiscal policy cannot and should not be permitted. Assuming press reports are accurate and the fed will soon commence an orderly wind down of its Balance Sheet, this is more good news. Size and composition of the Balance Sheet remain alarming. Intervention into the credit market like mortgagebacked securities is fiscal policy, not Monetary Policy. Already theres talk of having the fed bail out Student Loans and clinician funds. If were not careful we may make up, and it may become the central planners. It will allow the foray into credit allocation is to pay excess reserves and today paying a premium over market. Interest on required reserves was meant to counteract an imblessity tax and interest on excess reserves should not become a permanent tool of Monetary Policy. Normalization would suggest that shortterm Interest Rates be set by market forces. Today they are set from the top down by an administered rate paid on excess reserves and its a premium rate resting on uncertain Legal Authority. To ways into credit allocation and fiscal policy threaten the feds independence and Economic Future so lets hope the normalization has truly begun. I now recognize the Ranking Member for four minutes. Thank you, mr. Chairman, and thank you, chair yellen. It is a pleasure to have you with us today. Since day one, the story of the Trump Administration has been one of chaos and turmoil. This creates uncertainty that threatens the progress of our economy and the opportunities available of all american households. Trump made many big promises to hardworking americans about ushering in a new level of Economic Prosperity in america. Yet, despite all of its luster, lets look at what trump has actually done when it comes to our economy. Now that is good. You reversed the planned cut to federal Housing Administration markets insurance premium, that would have saved homeowners 500 a year, and they issued executive actions to begin to dismantle wall street reform and embrace the wrong choice act. The chairmans bill to gut dodd frank wall street reform and consumer protection. And there are actions that endanger the economic progress weve made since the great recession. In passing the wrong choice act, House Republicans once again are trying to weaken the independence of the fed and change the feds policy division to a mathematical formula and has banished its ability to support the economy and fulfill its mandate to promote full employment. The republican bill would also subject federal financial regulators including the fed to the politicized annual appropriations process. All of this wasnt bad enough. President trump will soon have the opportunity to reshape the makeup of the board of governors, thereby tilting policy in the direction of wall street. For example, earlier this week the white house announced the president s intent to nominate randall cua, l to serve as the feds vice chair for supervision and the post responsible for overseeing the feds implementation of wall street reform. This is troubling, given the opposition to key aspects of the doddfrank law and support for managers that would curtail the feds independence. While our economy has made substantial progress since the height of the financial crisis and we continue to see positive trends in the labor market as a result of the policy put in place by the fed. Congressional democrats and president obamas key aspects of our economy have yet to fully recover. Since the last testimony before the committee wage Growth Continues to lag and troubling economic disparities continue to exist among racial and ethnic lives. So i hope their policymakers would keep these trends in mind and the fact that Inflation Expectations have fallen as they evaluate the stance of Monetary Policy, for chair yellen, i commend you for your steady leadership and look forward to your testimony, and with that, mr. Chairman, i would yield back the balance of my time. The lady yields back. The chair rblg oizes mr. Becogn. Welcome back to the committee and despite nearly nine years of the most accommodative and unconventional Monetary Policy in u. S. History and despite some recent, positive economic news. Labor force participation remains at a disappointing 40year low and wages are stagnant and the economic low has yet to eclipse 3 . Making matters worse just like the farm bill that used to pay farmer not to plant the Federal Reserve by paying interest on excess reserves is effectively paying banks not to lend. Former fed chairman ben bernanke said as much in 2013 when he stated, quote, banks are not going to lend out the reserves at a rate lower than they can earn at the fed, end quote. The fed has adopted this interest on excess reserves policy to fund its enormous 4. 5 billion Balance Sheet by guaranteeing the largest banks in america this low risk above market rate of return on deposits, the fed is discouraging lending into the real economy effectively taking money out of communities across america and leaving less capital for main street householdses and businesses to prosper. I was glad to read about the feds intentions to start shrinking its oversized portfolio. I share the view of james board and others that this decision is long overdue. What concerns me, however, is that once again, the fed seems to be improvising instead of following a wellgrounded strategy. Earlier this year, some officials pointed to another fed funds rate increase in september with the move to start reducing the Balance Sheet beginning in december. Now we are hearing that the fomc might start the portfolio Reduction Plan in september, and put off until december any further Interest Rate increase. Again, i welcome initiating the process to reduce the size of the Balance Sheet sooner rather than later, but i look forward to your testimony and hopefully an explanation whether the fed is once again changing its strategy and if so, why . Thank you for coming today and i look forward to your testimony about these and other topics . The time of the gentleman has expired. The chair recognizes the gentle lady from wisconsin miss moore from the sub come they for one minute. Thank you so much, mr. Chairman and thank you, madam chairwoman for appearing here for the annual hawkins report. I want to start out by think thatti thanking you for our very thorough reply regarding disparities and labor markets for africanamericans and other minorities. Thank you. It did not have a lot of solutions and it was very thoughtful for the projects that seek to sign the answers and this disparity is very clear among minorities, but im concerneded that it is also increasing in all populations of working americans and it seems pretty clear that the challenge moving forward will be able to have income and wealth inequality in a way that the blunt instrument of Monetary Policy cant especially as the fed moves forward to raise rates. I understand you have to do it, but there is an asymmetric recovery that is troubling. Given that the poor and working class have not felt the benefits of the booming stock market and that inflation is under control, i think the congress can and should use the power of the purse to shore up the statements of the population that are still hurting from their session and i look forward to hearing your testimony, and i yield back. Time of the gentle lady has expired. Today we welcome the testimony of the honorable janet yellen. I fell sel she needs no further introduction. Chair yellen, you are now recognized for five minutes to give an oral presentation of your testimony. Thank you for being here. Thank you. Chairman henserling and member waters and other members of the committee, i am pleased to present the Federal Reserves semiannual Monetary Policy report to the congress. My remarks today will discuss the Economic Situation and outlook before turning to Monetary Policy. Since my appearance before this committee in february, the labor market has continued to strengthen. Teams have averaged 180,000 per month so far this year down slightly from the average in 2016, and still well above the pace we estimate would be sufficient on average to provide jobs for new entrants for the labor force. Indeed the Unemployment Rate has fallen since the start of the year. And right before the Participation Rate has changed a little this year, another indication of improving conditions and the jobs market given the downward trend in the series. A broader measure of labor market slack that includes workers marginally attached to the labor force and those working parttime who would prefer fulltime work has fallen this year and is now nearly as low as it was just before the recession. Its also encouraging that jobless rateses have continued to decline for most major demographic groups including for africanamericans and hispanics. However, as before the recession, Unemployment Rates for these minority groups remain higher than the nation overall. Meanwhile, the economy appears to have grown at a moderate pace on average so far this year. Although inflation adjusted the Gross Domestic Product is currently estimated to have increased at an annual rate of only 1. 5 in the First Quarter were recent indicators suggested that growth rebounded in the second quarter. In particular, growth and Household Spending which was weak earlier in the year has picked up in recent months and continues to be supported by rising Household Wealth and favorable consumer sentiment. In addition, this is fixed investment has turned up this year after having been soft last year and the Economic Growth abroad has provided important support from u. S. Manufacturing production and exports. The Housing Market has continued to gradually recover aided by the ongoing improvement in the labor market and Mortgage Rates that although are up somewhat from a year ago remain at relatively low levels. With regard to inflation, overall Consumer Prices as measured by the price index for personal consumption expenditures increased 1. 4 over the 12 months ending in may, up from 1 a year ago, but a little lower than earlier in the year. Core inflation which excludes energy and food prices is also down in recent months and was 1. 4 in may. A couple of tenths below the earlier year reading. It appears that the recent lower readings on inflation are partly the result of a few unusual reductions in certain categories of prices. These reductions will hold 12month inflation down until they dropped out of the calculati calculation. Nevertheless, with inflation continuing to run below the committees 2 longer run objective, the fomc indicated in its june statement that it intends to carefully monitor actual and expected progress toward our inflation goal. Looking ahead, my colleagues on the fomc and i expect that with further gradual adjustments in the stance of Monetary Policy, the economy will continue to expand at a moderate pace over the next couple of years with the job market strengthening somewhat further and inflation rising to 2 . This judgment reflects our view that Monetary Policy remains accommodative. Ongoing job gains should continue to support the growth of incomes and therefore consumer spending. Global Economic Growth, further gains in u. S. Exports, and favorable financial conditions coupled with the prospect of continued gains in domestic and foreign spending, and the ongoing recovery in drilling activity should continue to support business investments. These developments should increase resource utilizations and thereby fostering a stronger pace of wage increase in prices. Of course, considerable uncertainty always attends the Economic Outlook. There is, for example, uncertainty about when and how much inflation will respond to tightening resource utilization. Possible changes in fiscal and other Government Policies here in the United States represent another source of uncertainty. In addition, although the prospects for the Global Economy appear to have improved somewhat this year, the number of our trading partners continue to confront economic challenges. At present, i see roughly equal odds that the u. S. Economys performance will be somewhat stronger or somewhat less strong than we currently project. I will now turn to Monetary Policy. The fomc seeks to foster maximum employment and price stability as required by law. Over the first half of 2017, the committee continued to gradually reduce the amount of Monetary Policy accommodation. Specifically, the fomc raised the target range for the federal funds rate by one quarter percentage point at both its march and june meetings, bringing the target to a range of 1to1 and a quarter percent. In doing so, the committee recognized the considerable progress the economy had made, and is expected to continue to make toward our mandated objectives. The committee continues to explore the evolution of the economy, gradual increases in the federal funds rate over time to achieve and maintain maximum employment and staple prices. That expectation is based on our view that the federal funds rate remains somewhat below its neutral level. The federal funds rate that is neither expansionary nor contractionary and keeps the economy operating on an even keel. Because the neutral rate is quite low by historical standards, the federal funds rate would not have to rise all that much further to get to a neutral policy stance. But because we also anticipate that the factors that are currently holding down the neutral rates will diminish somewhat over time, additional gradual rate hikes are likely to be appropriate over the next few years to sustain the economic expansion and return inflation to our 2 goal. Even sew, the committee continues to anticipate that the longer run neutral level of the federal funds rate is likely to remain below levels that prevailed in previous decades. As i noted earlier, the Economic Outlook is always subject