Yellen calls U.S. economy, job market still subpar

Janet Yellen says the economy has regained ground lost to the deepest recession since the 1930s. But she says unemployment remains too high at 7.3 percent and notes that the Fed is still trying to accelerate the economy's recovery.

In testimony prepared for her confirmation hearing Thursday, Yellen says the economy is still performing far below its potential. And she points out that inflation is running below the Fed's 2 percent target.

“For these reasons, the Federal Reserve is using its monetary policy tools to promote a more robust recovery,” Yellen says in her testimony. “I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.”

Yellen offers no hints that she would deviate from the low-interest rate campaign of the outgoing chairman, Ben Bernanke. Her comments amount to a defense of the extraordinary measures the Fed has used to try to keep long-term borrowing rates near historic lows to encourage spending and promote growth. These measures have included three rounds of bond purchases.

Critics have warned that the Fed's support programs run the risk of igniting inflation or inflating price bubbles in assets like stocks or homes. Yellen says a strong recovery would ultimately allow the Fed to begin to normalize its policies. This would include reducing its reliance on its $85 billion-a-month in bond purchases, which have been intended to keep long-term rates down.

The Fed released Yellen's brief three-page opening statement the day before her confirmation hearing before the Senate Banking Committee. She is expected to win approval by the committee and by the full Senate to succeed Bernanke, whose second four-year term as chairman will end Jan. 31. (AP)