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Fed's bond purchase plans have worked, Yellen says

Fed's bond purchase plans have worked, Yellen says (by Greg Robb)

NEW YORK (MarketWatch) - Federal Reserve Vice Chairman Janet Yellen on Friday strongly defended the central bank's innovative bond purchase program, saying the benefits have been "sizable." In the absence of the Fed's asset purchases, the unemployment rate would have remained over 10% and core inflation would have fallen below zero this year, Yellen said, citing research at the central bank. She spoke at a monetary policy conference hosted by the University of Chicago Booth Business School. Going forward, market expectations about the timing and pace of the unwinding of the Fed's asset purchases will impact financial conditions, Yellen said. Conditions would likely "tighten immediately" if the market came to expect a more rapid selloff of the balance sheet while a slower-than expected-exit would likely be stimulative. As a result, the Fed will use great care in its communication, Yellen said. Last April, the FOMC members said they wanted the "renormalizing process" to take five years.