DENVER, Jan 8 (Reuters) - U.S. Federal Reserve Vice Chair Janet Yellen on Saturday defended the central bank's asset buying, citing an internal study showing the economy will gain 3 million jobs as a result of all of the Fed's purchases.
'It will not be a panacea, but I believe it will be effective in fostering maximum employment and price stability,' Yellen said in remarks prepared for delivery to the American Economics Conference.
Yellen said a simulation approximating the Fed's most recent asset-buying program was shown to generate about 700,000 new jobs.
The study goes on to suggest that inflation is currently a percentage point higher than would have been the case, implying that if the Fed had not bought longer-term securities after cutting interest rates to near zero in December 2008, the economy would now be close to a damaging deflationary spiral.
Yellen said longer term interest rates are currently lower than they would otherwise have been. Concerns about the Fed's controversial $600 billion bond-buying program -- that it will cause inflation, imbalances, and trigger a damaging competitive currency devaluation -- are misplaced, she said.
(Reporting by Mark Felsenthal; Editing by Leslie Adler) Keywords: USA FED/YELLEN (mark.felsenthal@thomsonreuters.com; +1 202 898 8329; Reuters Messaging: mark.felsenthal.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
'It will not be a panacea, but I believe it will be effective in fostering maximum employment and price stability,' Yellen said in remarks prepared for delivery to the American Economics Conference.
Yellen said a simulation approximating the Fed's most recent asset-buying program was shown to generate about 700,000 new jobs.
The study goes on to suggest that inflation is currently a percentage point higher than would have been the case, implying that if the Fed had not bought longer-term securities after cutting interest rates to near zero in December 2008, the economy would now be close to a damaging deflationary spiral.
Yellen said longer term interest rates are currently lower than they would otherwise have been. Concerns about the Fed's controversial $600 billion bond-buying program -- that it will cause inflation, imbalances, and trigger a damaging competitive currency devaluation -- are misplaced, she said.
(Reporting by Mark Felsenthal; Editing by Leslie Adler) Keywords: USA FED/YELLEN (mark.felsenthal@thomsonreuters.com; +1 202 898 8329; Reuters Messaging: mark.felsenthal.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.