Yellen Defends QE as Economic Benefit in Letter to Senator

Nov. 19 (Bloomberg) -- Janet Yellen, the nominee for Federal Reserve chairman, defended the central bank’s bond purchases in a letter to a U.S. senator, saying they boosted economic growth and provide benefits that exceed the risks.

* “By putting downward pressure on longer-term interest rates

and helping to make financial conditions more accommodative,

the Federal Reserve’s asset purchases have supported a

stronger economic recovery, improved labor-market conditions

and helped keep inflation closer to its 2 percent

objective,” Yellen said in a Nov. 18 response to questions

from Senator David Vitter, a Republican from Louisiana * In a separate letter to Senator Elizabeth Warren, Yellen

said “monetary policy is likely to remain highly

accommodative for a long time,” even after the Fed reaches

thresholds for considering an increase in the main interest

rate * Senator Jerry Moran, a Kansas Republican, asked Yellen about

steps the Fed was taking to ease the regulatory burden on

community banks; Yellen responded in a letter that the

assumption big banks will be bailed out by the govt is “a

damaging economic phenomenon that corrodes market discipline

of our largest banking firms and contributes to an un-level

playing field between large banks and small banks”

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