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US economy to grow solidly: Yellen

WASHINGTON--The U.S. economy is on track for “solid growth” in the second quarter after the winter freeze, U.S. Federal Reserve Chair Janet Yellen said Wednesday.

But with the housing industry slowing and unemployment still high, the economy still needs “a high degree of monetary accommodation,” she told a congressional committee.

And, she suggested, the Ukraine crisis poses a risk to the economy, as would intensified financial stress in emerging market economies.

In mostly sunny testimony to the Joint Economic Committee of Congress, Yellen said the growth stall in the first quarter stemmed from mostly transitory factors, “including the effects of the unusually cold and snowy winter weather.”

“With the harsh winter weather behind us, many recent indicators suggest that a rebound in spending and production is already under way,” she said.

Yellen said labor market conditions have improved “appreciably,” but that they “are still far from satisfactory,” despite the pickup in hiring last month and the fall in the unemployment rate to 6.3 percent.

Repeating a concern she has voiced since becoming Fed chair in February, she pointed to the still-high levels of long-term unemployed and those forced to work part-time because full-time jobs are not available.

“Many Americans who want a job are still unemployed,” she said.

She said she expects economic activity to expand “somewhat faster” this year than last, helped by less fighting in Washington over government spending, improved household wealth, and firmer global economic growth.

But she made clear that the Fed's monetary policy — its ultra-low interest rate stance and its slow drawdown of its bond-buying stimulus — are still appropriate and that policymakers do not foresee raising interest rates until mid- or late 2015.

She pointed out that even as the taper of the quantitative easing (QE) program goes on — falling from US$85 billion in December to US$45 billion starting this month — the Fed continues to buy bonds from the market.

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