Fed official urges more stimulus

By Karen Pantelides, economics editor


NEW YORK (CNNMoney.com) -- Ballooning U.S. debt is a serious long-term threat, but the economy needs more stimulus now, a top Federal Reserve official said Wednesday.

Fed Vice Chairwoman Janet Yellen said she supported the Federal Reserve's latest move to stimulate the still-tepid recovery by purchasing long-term Treasuries to drive down interest rates. She also called for more stimulus measures from Congress.

"I strongly supported the Federal Reserve's recent action because I believe it will be helpful in strengthening the recovery. But it is hardly a panacea," said Yellen, who was speaking at a Committee for Economic Development conference in New York.

"A fiscal program that combines a focus on pro-growth policies in the near term with concrete steps to reduce longer-term budget deficits could be a valuable complement to our efforts."

While the deficit seems to have "topped out," the aging population presents a longer-term threat to federal debt, Yellen said.

"Whatever size of government we choose, taxes must ultimately be set at a level sufficient to achieve an appropriate balance of spending and revenues," she said.

With economic growth still stuck at a rate considered too low to bring down high unemployment, many economists feel more stimulus is needed to jump start the sluggish recovery and create jobs.

But since the election, the government's attention has turned to deficit reductions and austerity, making talk of more stimulus politically unpopular.

The Fed's latest move to pump more money into the economy was sharply criticized around the world and raised concerns of a weakening U.S. dollar and rising inflation.

Yellen is widely considered to be dovish on inflation. And she dismissed the idea that the Fed's program would cause runaway inflation in the future.

"As the economy more fully recovers, the Federal Reserve will need to remove this extraordinary monetary accommodation in order to maintain price stability and keep inflation expectations well anchored," Yellen said. "I am confident that the Federal Reserve has both the commitment and the tools to achieve this unwinding."

Yellen also addressed concerns about growing imbalances in the global economy. She described a "two-speed global recovery" in which emerging economies are growing rapidly and outpacing industrialized countries struggling to recover from the worldwide slowdown.

She said that more fiscal stimulus could help address those concerns by promoting U.S. growth and increasing demand for foreign goods.  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,083.80 -2.83 -0.02%
Nasdaq 4,472.11 -1.59 -0.04%
S&P 500 1,987.98 0.97 0.05%
Treasuries 2.51 0.04 1.83%
Data as of 7:53pm ET
Company Price Change % Change
Facebook Inc 74.98 3.69 5.18%
Ford Motor Co 17.84 0.06 0.34%
Yahoo! Inc 36.17 1.46 4.21%
Bank of America Corp... 15.62 0.10 0.64%
Apple Inc 97.03 -0.16 -0.16%
Data as of 4:02pm ET

Sections

Would you pay $7.76 for a Big Mac? The Economist's iconic Big Mac index is a lighthearted way to compare currencies and buying power around the world. More

The government says health insurers are charging lower premiums, thanks to a provision in Obamacare. More

In New York City, business travelers have ditched meals at Starbucks in favor of Seamless takeout, according to a new report. More

CNNMoney readers rip managers who micromanage to death, play favorites, throw their staff under the bus and steal credit for their work. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.