In the face of “serious headwinds” holding back the global economic recovery, the Federal Reserve has “some scope for action,” including providing more information on the path of interest rates or “through additional purchases of longer-term financial assets,” Janet Yellen said today in a speech at the Federal Reserve Bank of San Francisco.
Yellen addressed the ongoing challenges impacting recovery from what she called “the most severe recession and financial crisis to afflict our country since the Great Depression.” Unemployment, she noted, has declined about one percentage point over the past two years and is now forecast to decline only slightly over the next few years to an average rate of a still “painfully high” 8.4 percent in 2013.
Consumer spending, she said, is not expected to serve as a main engine of growth due to factors such as unemployment and underemployment, debt burdens, reduced access to credit, slow gains in wages and declines in home values.
The Federal Reserve is “moving vigorously” to promote a stronger economic recovery, Yellen said, but, echoing comments by Federal Reserve Chairman Ben Bernanke last August, she said that “monetary policy is not a panacea” and called on Congress and the Obama administration to “also do their part,” especially in adopting measures to address the deficit and “the dysfunctional housing market,” whose collapse, she said, continues to impede recovery, with new home construction at only about one-third of its average pace in recent decades.
Yellen also called for “global policy coordination." We face a dearth of aggregate demand, not just among the advanced economies, but also for the global economy as a whole,” she said. She encouraged emerging market economies to take “forceful action” to address the region’s fiscal and financial challenges, chiefly the European debt crisis.
Asian countries especially, she said, “have the scope to bolster domestic demand,’ which would in turn support more sustainable global economic growth as well as “enhance social welfare at home. The most profound effect of the Asian miracle of the past several decades has been to lift hundreds of millions of people out of poverty.”
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.