The US economic recovery continues to be hampered by spillover effects of the European crisis and a downtrodden housing market, Federal Reserve Vice Chair Janet Yellen said on Thursday.
Yellen, Fed Chairman Ben Bernanke's influential No. 2 at the central bank's board, said the world's major economies were all slow to mend from the massive shock of the financial crisis and recession of 2007-2009.
"Their performance is even more anemic than we would have expected," Yellen said in prepared remarks to a panel sponsored by the International Monetary Fund, which is having a meeting in Tokyo this week. "This shortfall likely reflects the unusually limited scope for fiscal stimulus at present, which very accommodative monetary policies have not been able to fully offset."
The Fed last month launched a third round of unconventional monetary stimulus, announcing an open-ended program of bond purchases aimed at supporting a still-fragile economy, which expanded at a paltry 1.3 per cent annual rate in the second quarter.
The central bank has committed to buy some $40 billion per month of mortgage-backed debt, and said it will continue to make asset purchases until it sees substantial improvement in the labour market. Yellen, who is seen as a strong supporter of the Fed's unconventional monetary policies, blamed Europe's troubles for some of the recent weakness in US economic performance. She also noted emerging Asian economies had also begun to slow as exports to rich countries wane.
"Spillovers from Europe and a still-depressed housing market also help account for our tepid recovery and elevated unemployment," Yellen said. US unemployment fell sharply to 7.8 per cent in September from 8.1 percent in August, but analysts say growth is not strong enough for the improvement to be sustained. Yellen said Asian economies could benefit from a deeper structural shift that would see a move away from their emphasis on export-led growth toward a model that is more reliant on domestic demand.
