The health of the U.S. economy and the extraordinary and controversial measures the Federal Reserve has taken to support it will top the agenda on Tuesday when Janet Yellen testifies to lawmakers for the first time as head of the Federal Reserve.
Yellen, in just her second week on the job since succeeding Ben Bernanke earlier this month, will want to reinforce the central bank's determination to halt the money-printing presses later this year while ensuring investors that a rise in interest rates remains a long way off, economists say.
She is expected to strike a tone of cautious optimism after a decidedly mixed run of data that has raised questions about the prospects for the world's largest economy.
Yellen's prepared testimony on the Fed's semiannual monetary policy report will be released before the hearing before the Republican-controlled House of Representatives Financial Services Committee starts at 10 a.m. ET.
New Fed chairs sometimes set monetary policy on a different path, as Paul Volcker did in 1979. But Yellen, who was vice chair under Bernanke, was a co-author of the Fed's current accommodative policy and effectively wrote the book on how the central bank communicates, so she will probably change little so soon after taking the reins.
More than four years after the end of the 2007-2009 recession, the Fed has embarked on perhaps its most difficult policy shift as it tries to back away from flooding the financial system with ultra-easy money. While it expects to keep interest rates near zero until well into next year, it has begun scaling back its bond-buying stimulus, though the measured pace could frustrate some Republicans who think the program is reckless.
One possible pitfall for Yellen would be to get ensnared in debate with lawmakers over fiscal policy, an area over which the Fed has no jurisdiction even though decisions last year in Congress have slowed the economic recovery. Others include the politically charged area of bank supervision, and the persistent worries that the Fed's easy money has stoked potentially dangerous asset-price bubbles.
