According to a report from the Wall Street Journal,Federal Reserve Vice Chairwoman Janet Yellen signaled Thursday that no big changes would come to the central bank under her leadership if she becomes its next chief.
She indicated the Fed would consider scaling back its $85 billion-a-month bond-buying program at coming policy meetings, though she didn't say whether she favors moving soon.
"We're taking account of the costs and efficacy of that program as we go along. At this point I believe the…benefits exceed the costs," Ms. Yellen told members of the Senate Banking Committee in a hearing on her nomination to become Fed chairwoman.
The Fed has said it would end the program if the costs and risks become too large. Ms. Yellen indicated she doesn't think the central bank is at that point yet.
She said there are risks associated with the Fed ending the program too early or too late, as with the Fed's easy-money policies more broadly.
"It's important not to remove support especially when the recovery is fragile and the tools available to monetary policy should the economy falter are limited" given that short-term rates are near zero, she said. "I believe it could be costly to withdraw accommodation or to fail to provide adequate accommodation."
On the other hand, as the recovery proceeds it is important the Fed wind down its easy-money policies when the time comes, she said. She emphasized the Fed is committed to maintaining its 2% inflation target and that it has the will and the tools to normalize monetary policy when the time comes.
Ms. Yellen said she sees "meaningful progress" in the labor market but still wants to see evidence that the economy is growing fast enough to sustain that progress, suggesting she isn't yet convinced it's time to pull back on the bond-buying program.
On bank regulation, Ms. Yellen said addressing the "too-big-to-fail" problem is "among the most important goals of the post-crisis era."
"Our objective in regulation should be too put in place tough enough regulations…that we level the playing field," Ms. Yellen said. Since large firms do pose risks to the financial system, "we should be making it tougher for [big banks] to compete and encouraging them to be smaller."
Ms. Yellen said she wants to see how Dodd-Frank financial-overhaul requirements are implemented before considering additional changes to regulation of large banks.
