Slack in the labor market and low inflation will keep interest rates near zero even as the broader economy gradually improves, Federal Reserve Chair Janet Yellen told Congress Wednesday morning.
In remarks prepared for her semi-annual testimony before the Joint Economic Committee, Yellen expressed concerns about slow wage growth, high levels of long-term unemployment and those people working part-time who want full-time work.
The U.S. economy is picking up after a winter lull brought on by unusually bad weather across much of the country, but the labor market is "far from satisfactory" despite the unemployment rate falling to 6.3 percent in April.
"With the harsh winter behind us, many recent indicators suggest that a rebound in spending and production is already under way, putting the overall economy on track for solid growth in the current quarter," Yellen said.
She expects growth will expand at a "somewhat faster pace" this year than the 1.9 percent growth rate seen in 2013.
However, inflation is likely to run below the Fed's 2 percent target, so a high degree of monetary accommodation remains warranted for the foreseeable future, according to Yellen.
The recent housing market slowdown "could prove more protracted than currently expected," and could prevent a more robust recovery from a weak first quarter that saw the economy grow only 0.1 percent.
"Adverse developments abroad, such as geopolitical tensions or an intensification of financial stresses in emerging market economies" also pose a risk to the economic outlook.
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