Federal Reserve Chair Janet Yellen, in what could be her last appearance before Congress as head of the central bank, described an increasingly bright outlook for the US economy while minimizing the risks of financial instability.
"Economic expansion is getting wider in all sectors, as well as in much of the global economy," Yellen said in a testimony prepared for the bicameral Joint Economic Committee on Wednesday in Washington. "I hope that, with gradual adjustments in the stance of monetary policy, the economy will continue to expand and the labor market will strengthen a little more, supporting faster growth in wages and incomes."
The hearing is scheduled to begin at 10 am
In her statement, Yellen repeated that she expects the Fed to continue to gradually increase interest rates and cut its balance sheet. The central bank has increased the target range for the federal funds rate four times in the last two years.
Yellen's term expires in early February, and President Donald Trump nominated Fed Governor Jerome Powell to take his place. Powell is waiting for confirmation from the Senate. Yellen has announced that she will leave the Fed once that happens.
With the shares trading at record levels, Yellen minimized the threat of financial instability.
Well capitalized banks
"Although badet valuations are high by historical standards, overall vulnerabilities in the financial sector appear moderate, as the banking system is well capitalized and broad measures of leverage and credit growth they remain contained, "he said.
After their comments were published, a government report underscored how the economy is gaining momentum. Gross domestic product expanded 3.3 percent in the third quarter, faster than a rate initially reported by the government. 3 percent, according to the figures of the Department of Commerce.
Calling attention to the milestones of post-crisis recovery, Yellen noted that 17 million more Americans were employed compared to eight years ago and unemployment had fallen to 4.1 percent, below the peak of the 10 percent crisis.
His main achievement as president was to design a slow and careful departure from the unconventional relaxation policies that the Fed unleashed during the financial crisis and the recession that followed. However, Yellen acknowledged that many Americans were not benefiting as much as economists expected.
"Despite these gains in the labor market, wage growth has remained relatively modest," he said.
Inflation has also affected Fed officials, remaining surprisingly low in the face of an increasingly tight labor market. While recognizing that structural factors may be steadily lowering prices, Yellen maintained her expectation that inflation would gradually rebound to the Fed's 2 percent target.
"In my opinion, the recent lower readings of the Inflation probably reflects transitory factors, "she said. "As these transitory factors fade, I anticipate that inflation will stabilize around 2 percent in the medium term."
The Fed's preferred inflation indicator remained at 1.3 percent in the year to September, after excluding the food and energy components.  Yellen urged Congress to address the two issues that undermine the potential for faster economic growth in the US. US: the decrease in the size of the US workforce in relation to the population and the disappointing levels of productivity growth.
"Congress could consider policies that encourage business investment and capital formation, improve the nation's infrastructure, raise the quality of our education system and support innovation and the adoption of new technologies," Yellen said.