Yellen: Globalization, Technological Change Have Been Harmful to Many

The offshoring of jobs associated with globalization combined with technological change have been devastating for many American communities, while designing programs to help has proved difficult, Federal Reserve Chairwoman Janet Yellen said Tuesday.

Speaking at the British Academy, Ms. Yellen said the two processes were intertwined, and had led to a loss of middle-income jobs that created a feeling of despair among those affected.

"Both of these things have been quite harmful to a very large share of the population," she said, referencing a range of problems such as increased death rates among some segments, and rising drug use.

Ms. Yellen's comments about the downside of some big changes in the economy over recent decades were unusually direct.

"Trade can be good, and it has been good," she said. "But there are losers, and it's challenging to design interventions that would help the losers."

Ms. Yellen also said the U.S. financial system is "safer and sounder" than it was before 2008, although another crisis can't be ruled out,

Ms. Yellen said the Fed is spending more time on detecting threats to financial stability, including in places that aren't subject to regulation.

"We have been very focused on making sure the core of our financial system has enough capital that we can provide the assurance that our major banks could go on lending to our economy even after a major shock, " she said. "The system is much safer and sounder."

Ms. Yellen also cited improvements to the "architecture" of the system, including central clearing for an increased range of derivatives contracts.

But she said another crisis can't be excluded, although she hoped "it will not be in our lifetime."

In an interview with the head of the British Academy, Ms. Yellen repeated her view that interest rates would rise only gradually and to levels below recent historical norms. She also said a plan to shrink the Fed's $4.5 trillion balance sheet would ensure that it happened "gradually and predictably."

Ms. Yellen expressed concern that persistently low rates of inflation could lead some to expect prices to rise just as modestly in the future, but added that the signals from professional forecasters, households and the financial markets have been mixed.

"We would be worried if expectations were slipping, as that could make low inflation endemic," she said.

Write to Paul Hannon at paul.hannon@wsj.com and David Harrison at david.harrison@wsj.com

(END) Dow Jones Newswires

June 27, 2017 15:31 ET (19:31 GMT)