Yellen Acknowledges Weaker Economic Data; Markets Rally

By Bill Chappell

Published February 27, 2014 at 5:12 PM CST

Federal Reserve Board Chair Janet Yellen gestures as she testifies during a Senate Banking, Housing and Urban Affairs Committee hearing while delivering the Federal Reserves semiannual Monetary Policy Report on Capitol Hill Thursday.

Citing "softness" in the U.S. economy, Federal Reserve Chair Janet Yellen told a Senate panel today that the Fed will try to determine if the results are a new trend or are related to this winter's intense cold and storms. Analysts are seeing her comments as signaling a potential shift in the "tapering" of the Fed's stimulus program.

"U.S. stocks climbed, with the Standard & Poor's 500 Index rising to a record," reports Bloomberg News, noting the impact of Yellen's statements about the Fed's strategy for stimulus cuts.

Yellen spoke to the Senate Banking Committee Thursday, in something of a make-up session. A planned appearance earlier this month had to be rescheduled due to an imposing storm.

"Yellen said policymakers are trying to determine whether the economy is on the growth track the Fed has forecast," NPR's John Ydstie reports for our Newscast unit. "If the recent slowdown turns out to be more than just weather-related the Fed could pause the wind-down of its stimulus program. But Yellen said that would require a 'significant change' in the economic outlook."

The Fed chair told the panel that "since my appearance before the House committee, a number of data releases have pointed to softer spending than many analysts had expected. Part of that softness may reflect adverse weather conditions, but at this point, it's difficult to discern exactly how much."

The mention of softness in economic data and a willingness to review the situation was enough to send markets higher after Yellen spoke.

"Yellen said that they would consider pulling back on their tapering schedule if the economy slowed in a meaningful manner," equity strategist Matt Maley, of Miller Tabak & Co. tells Bloomberg. "She seems to be more willing to step back on the accelerator than she was when she last spoke to Congress."

Those comments came in the discussion portion of today's event. The prepared statement Yellen delivered was identical to the one she presented on Feb. 11; as Mark reported for The Two-Way back then, she said she expected policymakers would "continue to reduce the amount of money the Fed is injecting into the economy."