Transcripts For CSPAN3 Monetary Policy Report 20150224 : vim

Voting rights march in 1965. Then theyll turn to the Monetary Policy report from the fed. Youre watching live coverage here on cspan3. Will come to order. We have a quorum. The committee will briefly conduct an executive session to report s527 to award a congressional gold medal to the foot soldiers who anticipated in bloody sunday, turnaround tuesday of the final selma to montgomery Voting Rights march which served as a catalyst for the Voting Rights act of 1965. Im pleased to serve as an original cosponsor of this bill. I thank the other members of this committee including the Ranking Member, whove also agreed to cosponsor this legislation. With that understand that there are no amendments and there are no objections. Mr. Chairman may i make im pleased we can mark up this important piece of legislation today. A bill with strong bipartisan support as chairman shelby said. It honors those americans who fought so hard for civil rights with the congressional gold medal. I want to thank senator scott a member of this committee, for joining with me in cochairing this years bipartisan congressional civil rights pilgrimage to selma to commemorate the 50th anniversary of the marches for Voting Rights. This is my third trip. I know a number of other senators will be on this trip. I think we best honor the selma foot soldiers by remembering them not just with a medal, but with staying true to their purpose. I was secretary of state of ohio in the b. 1980s, election law used to be my responsibility. I followed election law closely and voting laws closely since then. Used to be we were in the business of expanding voter rolls but lately too many states have thrown up barriers to voting ostensibly to cure the problem of inperson voting fraud, but this kind of fraud is almost nonexistent. Years later state governments are once again making it a burden making it a bit harder or in some cases a lot harder to vote. Lets honor the foot soldiers who senator shelby just talked not just today but on march 7th, and in everything we do. So thank you mr. Chairman. All those in favor, say aye. Aye. All opposed say nay. Ayes clearly have it. Now order that 527 without amendment be reported favorably by the banking committee. I also ask unanimous consent that the staff be allowed to make any technical and conforming changes and that we waive the gordon rule. Hearing no objection so ordered. We will now move to a hearing on the Federal Reserve semiannual Monetary Policy report to the congress. Today, the committee will receive testimony Foreign Policy Federal Reserve chair yellen as has been required by statute since 1978. Although the Federal Reserve chair has been using this venue for decades to communicate directly to congress and the American People i, and many of my colleagues have been calling for greater accountability, and more effective disclosure for years. In response weve heard a chorus of former Federal Reserve officials who have lined up to defend the structure and the degree of transparency of the fed. Further accountability to congress, some have argued, is not needed. Im interested to hear whether the current chair shares this view, and whether she believes that the fed should be immune from any reform. As far as Monetary Policy is concerned, many question whether the fed can rein in inflation, and avoid a destabilizing asset crisis when the time comes to unwind its 4. 5 trillion Balance Sheet. The minutes posted online do little to answer the questions of when and how this will be done. And the most recent fomc transcript available to the public is from 2008. Over seven years ago. Even though the fed has several Monetary Policy tools at its disposal, an action of this magnitude has never before been taken to my knowledge. The federal open Market Committee continues to report that it can be patient in keeping the federal funds rate near zero. Too much delay could lead to a more painful correction down the road. What the fomc is thinking and how theyre analyzing this very difficult problem remains a mystery, however. And yet some continue to dismiss calls for change or more transparency at the fed. I would argue, however, that theres an even greater need for additional oversight by congress, and further reforms. Our central bank is expanding its influence over households businesses, and markets in recent years. Not only has it pushed the boundaries of traditional Monetary Policy but its also consolidated Unmatched Authority as a financial regulator. As the fed grows larger and more powerful much of this authority has become more concentrated in washington, d. C. , and in new york. The fed emerged from the financial crisis as a super regulator, with unprecedented power over entities that it had not previously overseen. With such a delegation of Authority Comes a heightened responsibility, i believe for the congress to know the impact these new requirements place on our economy as a whole. The role of congress is not to serve on the federal open Market Committee, but it is to provide strong oversight, and when time commanded, bring about structural reforms. As part of this process, the committee will be holding another hearing next week to discuss options for enhanced oversight and reform in the fed. Senator brown . Thank you, mr. Chairman. Chair yellen, welcome back. Its good to see you again, and good to have you in front of our committee. Our economy continued to see strong employment gains, and Economic Growth at the end of 2014. But we know the improvements in the economy are not being felt by enough americans. The gains we made over the past five years, 11. 5 million net private sector job growth the last five years come on the heels of nine years when we lost 4. 5 million jobs. Some pundits politicians, have been predicting runaway inflation for years. They clearly dont have a very good grasp of what is happening for most americans. Low wage growth has continued for the majority of americans. Declining participation in the workforce is troubling. In fact, as you pointed out, madam chair the income inequality gap is actually widened during this recovery. Its good mr. Chairman we begin our session today by commemorating the selma foot soldiers. We must also note the wealth gap between white and black American Families has widened. Low and middle income americans havent benefited much from low interest r5i9s. Workers with stagnant wages have trouble saving for a down payment or their retirement for their childrens education. These are issues that congress should be addressing but the everyday struggle of americans needs to be part of the feds consideration in making Monetary Policy too. I appreciate chair yellen your announcement last month of plans to create the Community Advisory council and well have 15 members meet twice a year with the board in washington to offer perspectives on their economic circumstances, and the needs of low and moderate income communities, and consumers. I hope the entire Federal Reserve system, the 12 Regional Banks, as well as the board in washington, will engage Community Leaders way more than they have in the past, will do what you have done by setting the tone in washington and incorporate diverse the diverse perspectives into their Decision Making. We too often hear concerns that the fed is a system that is run by and to benefit the very largest banks. Last november i held a subcommittee hearing on one facet of this regulatory capture. The hearing explored concerns about the culture of the banks, and the regulators. A regulatory culture that is fair and tough that challenges group think that produces rules and regulations designed to strengthen the Financial Stability of our economy will protect americans financial interests. I applaud the fed for finalizing strong rules for the nations largest and riskiest Financial Institutions. I encourage you to move forward to finalize outstanding proposals so that everyone will benefit from the certainty, the certainty of having appropriate rules in place. Its been more than a year since the fed released an advanced notice of proposed rule making on commodities trading and fiscal Asset Ownership for exam in todays papers there were reports of a doj investigation of ten banks for activities into Precious Metals markets and we have yet to see a proposed rule. The job doesnt end there. You must then send a message to your examiners that these rules must be implemented and enforced. Finally while some of my colleagues are eager to help you to help you and the fed decide Monetary Policy, i thinkc rs thats the wrong role for congress. Im all for transparency. I think more is better, as a general rule. That every one of us knows there are times that can you do better by having a candid discussion in private. One, our real goal must be to have a Federal Reserve that works for all americans to have a strong the economy that begun fits low and middle class low wage workers and the middle class, as much as the wealthiest and to have a stable and diverse Financial System that provides opportunities for all americans. Not one that threatens their savings. Thats why your dual mandate to promote price stability and employment, and so i appreciate perhaps more than that you perhaps more than any of your predecessors or at least as much understands the dual mandate, including employment, how important that is. It remains important today. Thank you. Madam chair, welcome to the committee. We look forward to your testimony, and question and answer period. Your written testimony will be made part of the record in its entirety. You proceed briefly to outline what you want to tell us. Chairman shelby Ranking Member brown, and members of the committee, im pleased to present the Federal Reserves semiannual Monetary Policy report to the congress. In my remarks today i will discuss the current economic situation, and outlook before turning to Monetary Policy since my appearance before the Committee Last july the Employment Situation in the United States has been improving along many dimensions. The Unemployment Rate now stands at 5. 7 . Down from just over 6 last summer and from 10 at its peak in late 2009. The average pace of monthly job gains picked up from about 240,000 per month during the first half of last year to 280,000 per month during the second half. And employment rose 260,000 in january. In addition longterm unemployment has declined substantially. Fewer workers are reporting that they can find only parttime work when they would prefer fulltime employment. And the pace of quits often regarded as a barometer of worker confidence and labor Market Opportunities has recovered nearly to its prerecession level. However, the Labor Force Participation rate is lower than most estimates of its trend, and wage growth remains sluggish, suggesting that some cyclical weakness persists. In short, considerable progress has been achieved in the recovery of the labor market, the room for further improvement remains. At the same time that the labor market situation is improved domestic spending and production have been increasing at a solid rate. Real grosnph domestic product is now estimated to have increased at a 3. 75 annual rate during the second half of last year. While gdp growth is not anticipated to be sustained at that pace, it is expected to be Strong Enough to result in a further gradual decline in the Unemployment Rate. Consumer spending has been lifted by the improvement in the labor market as well as by the increase in household purchasing power resulting from the sharp drop in oil prices. However Housing Construction continues to lag. Activity remains well below levels we judge could be supported in the longer run by population growth and the likely rate of household formation. Despite the overall improvement in the u. S. Economy and the u. S. Economic outlook longerterm interests in the United States and other economies have moved down significantly since the middle of last year. The declines have reflected at least in part disappointing foreign growth and changes in Monetary Policy abroad. Another notable development has been the plunge in oil prices. The bulk of this decline appears to reflect increased global supply, rather than weaker global demand. While the drop in oil prices will have negative effects on energy producers, and will probably result in job losses in this sector causing hardship for affected workers and their families it will likely be a significant overall plus on net for our economy. Primarily that boost will arise from u. S. Households having the wherewithal to increase their spending on other goods and services, as they spend less on gasoline. Foreign economic developments however, could pose risks to the u. S. Economic outlook. Although the pace of growth abroad appears to have stepped up slightly in the second half of last year, foreign economies are confronting a number of challenges that could restrain Economic Activity. In china, Economic Growth could slow more than anticipated, as policymakers address financial vulnerabilities, and manage the desired transition to less reliance on exports, and investment, as sources of growth. In the euro Area Recovery remains slow and inflation has fallen to very low levels. Although highly accommodative Monetary Policy should help boost Economic Growth and inflation there, Downside Risk to Economic Activity in the region remain. The uncertainty surrounding the foreign outlook however, does not exclusively reflect Downside Risks. We could see Economic Activity respond to the policy stimulus now being provided by foreign Central Banks, more strongly than we currently anticipate. And the recent decline in World Oil Prices could boost overall global Economic Growth more than we expect. U. S. Inflation continues to run below the committees 2 objective. In large part, the recent softness in the all items measure of inflation for personal consumption expenditures reflects the drop in oil prices. Indeed the pce price index edged down during the Fourth Quarter of last year and looks to be on track to register a more significant decline this quarter, because of falling Consumer Energy prices. But core pce inflation has also slowed since last summer. In part reflecting declines in the prices of many imported items, and perhaps also some passthrough of Lower Energy Costs in to core Consumer Prices. Despite the very low recent readings on actual inflation, Inflation Expectations as measured in a range of surveys of households and professional forecastors, have thus far remained stable. However, inflation compensation as calculated from the yields of real and nominal treasury securities, has declined. As best we can tell, the fall in inflation compensation mainly reflects factors other than a reduction in longerterm Inflation Expectations. The committee expects inflation to decline further in the near term before rising gradually toward 2 over the medium term, as the labor market improves further, and the transitory effects of Lower Energy Prices and other factors dissipate. But we will continue to monitor inflation developments closely. Ill now turn to Monetary Policy. The federal open Market Committee is committed to policies that promote maximum employment and price stability consistent with our mandate from the congress. As my description of economic developments indicated, our economy has made important progress toward the objective of maximum employment. Reflecting in part support from the highly accommodative stance of Monetary Policy in recent years. In light of the cumulative progress toward maximum employment, and the substantial improvement in the outlook for labor Market C