For the first time as Fed Chair, Janet Yellen testified before Congress. She essentially repeated the lines from the last Fed meeting saying that the Fed will continue with its tapering at the current pace and that it will likely keep the zero interest rate policy "well past the time that the unemployment rate declines below 6-1/2 percent." As mentioned in this Business Insider article, Chairwoman Yellen failed to deliver a dovish surprise. In other words, it could have been worse for savers.
One Congressman did question Chairwoman Yellen about the effect of the Fed’s extreme monetary policy on seniors and others who depend on their savings for income. That Congressman was Representative Dennis Ross, a Republican who represents the 15th District in Florida. Below is a video of his questions and the Chairwoman’s replies.
As you can see in the video, Chairwoman Yellen’s replies were close to what we have heard from Bernanke. According to her, the low interest rates are the result of a weak economy, and once the economy recovers, higher interest rates will return. Below is a transcript of part of this exchange:
U.S. Representative Dennis Ross:
When your predecessor was here before, Chairman Bernanke, he talked about the effect on the seniors who have fixed incomes and aren’t concerned about home appreciation. They’re more concerned about CD rates, savings accounts because that’s their livelihoods, that’s their incomes. Can you comment at all as to any hope or suggestions for those seniors of mine back home that are on a fixed income that are dependent on not a zero interest rate but at least some return on their investment.to allow them to live an affordable life.
Fed Chair Janet Yellen:
So I know that this is a difficult situations for seniors in that position, and I would simply say that our objective is to get the economy moving and into a state of full recovery as rapidly as we can. And when we have accomplished that, rates of return will come back to more normal levels and we’ll see higher returns.
At least Chairwoman Yellen offered some sympathy to seniors and others who depend on interest, but just like Bernanke, she basically said the blame for zero interest rates is the weak economy that has been very slow to recover.