Federal Reserve Vice Chair: Aggressive Stimulus Must Continue

On Monday, Federal Reserve Vice Chair Janet Yellen said the Fed must continue its aggressive purchasing of $85 billion of bonds a month to stimulate the U.S. economy and spur employment.

"At this stage, I do not see any (potential costs) that would cause me to advocate a curtailment of our purchase program," said Yellen. "Insufficiently forceful action to achieve our dual mandate also entails costs and risks."

Recently, some Fed members expressed concerns that the Fed’s unprecedented move to, as the Wall Street Journal described it, “effectively print more money” represents substantial risks to economic growth and future inflation. But Yellen says the cost of doing nothing exceeds those concerns.

“The large shortfall of employment relative to its maximum level has imposed huge burdens on all too many Americans and represents a substantial social cost," said Yellen. "Prolonged economic weakness could harm the economy's productive potential for years to come."

Since 2008, the Fed has more than tripled the size of its portfolio of assets to $2.861 trillion.

The Fed’s stimulus scheme is slated to continue until unemployment drops to 6.5%. Presently, unemployment stands at 7.9%.


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