The Federal Reserve will continue to bolster the U.S. economy, Fed Chair Janet Yellen said on Monday, given the halting pace of the recovery and a still moribund job market.
In some ways, labor conditions are tougher now than in any other recession, Yellen said at a speech in Chicago. She added the Fed’s “extraordinary commitment,” in the form of massive bond-buying and ultra-low interest rates, is “still needed, and will be for some time.”
Investors were closely monitoring Yellen’s speech for comments on interest rates. During her first news conference following the Fed’s Open Market Committee (FOMC) rate decision, equities were hard hit by the suggestion of an earlier-than-anticipated increase in rates. She suggested a rate hike could come as soon as next year, a pace earlier than most on Wall Street had expected.
Read More Fed tapers another $10 billion
Yellen, who took the helm of the central bank a few months ago, said the economy was “considerably short” of the Fed’s goals. The Fed chief’sremarks on Monday hinted that—at a minimum—interest rates would remain at near-zero levels for an extended period.
Stocks surged on Yellen’s dovish assessment of the economy. The Dow Jones Industrial Average spiked to session highs, adding 150 points. The price of the 30-year Treasury bond, however, fell sharply as Wall Street cheered the Fed chief’s remarks. The 10-year yield hovered near 2.7 percent, down substantially from December’s peak at 3.0 percent.
In recent days, yields—which move in the opposite direction of price and affect borrowing costs—have crept higher on the suggestion that the economy was improving, and amid speculation the Fed might tighten monetary policy.
—CNBC.com’s JeeYeon Park contributed to this report.