Federal Reserve Chair Janet Yellen delivered an upbeat message on the economic outlook to lawmakers and parried attacks from Republicans who say the central bank is too secretive and needs stronger oversight.
Yellen repeated that the Fed is likely to raise its main interest rate this year, assuming its forecasts for stronger growth and lower unemployment are realized.
The first rate increase in almost a decade "will signal how much progress the economy has made in healing from the trauma of the financial crisis," Yellen, 68, told members of the House Financial Services Committee on Wednesday.
Seeking to reassure investors accustomed to more than six years of near-zero borrowing costs, she emphasized that the timing of liftoff is less important than the subsequent pace of increases, which she said would be gradual. Policy will probably remain "highly accommodative for quite some time," she said.
During more than two hours of questions and answers, Yellen defended the Fed's record on monetary policy and bank regulation, and she disputed suggestions from Republicans that the central bank would do better to follow a formula or rule for setting rates.
In the most heated exchanges, Yellen came under fire from Republican committee members over the Fed's refusal to fully comply with a subpoena for documents relating to a 2012 leak of confidential policy deliberations.
Jeb Hensarling, the Texas Republican who heads the Financial Services Committee, said the Fed had "crossed the line" by failing to provide the documents.
Seeks to Cooperate
Yellen said the Fed is seeking to cooperate with the committee and that complying with the subpoena would interfere with an existing criminal investigation by the Department of Justice.
"We fully intend to cooperate with you to provide the documents you requested but we are not going to provide them now," she said in a heated exchange with Sean Duffy of Wisconsin, who heads the committee's investigative panel.
"Madame chair, it appears that you are the one who is jeopardizing, or the Fed is the one who is jeopardizing, this investigation," Duffy said.
Yellen also used her prepared testimony to respond to Republican charges that the Fed is insufficiently transparent and needs stricter oversight by Congress.
She cited the Fed chair's quarterly press conferences, the publication of central bank officials forecasts for the economy and interest rates and the adoption on an explicit inflation target among recent efforts to improve transparency.
Political Pressure
She said "effective communication" was "crucial to ensuring that the Federal Reserve remains accountable." At the same time, she warned against "measures that affect the ability of policy makers to make decisions about monetary policy free of short-term political pressure."
