Fed chair dismisses claims US economy is a bubble

NEW YORK

Federal Reserve Chair Janet Yellen said Thursday that she does not believe the U.S. economy is a bubble.

Speaking at an event at the private residence center for graduate students at International House of New York, Yellen responded to her critics, both in the financial realms and the political -- such as the Republican presidential frontrunner Donald Trump -- who recently claimed that the economy could face another major recession.

"This is an economy on a solid course. I would not describe it as a bubble economy," she said.

Yellen stressed that the job market has improved greatly since the 2008 financial crisis, and the unemployment rate has been brought down to 5 percent, but noted that the labor market still has room to improve.

The Chair also defended the Fed's decision to raise interest rates last December, the first in almost a decade.

"I don’t think December was a mistake. The economy has continued to progress after that," she said, and added that a gradual path of rate increases would be appropriate."

Yellen was joined by three of her predecessors -- Ben Bernanke, Alan Greenspan and Paul Volcker -- in New York. The event was a first in history as they met to discuss the U.S.' economic outlook.

For the domestic economy, Bernanke said global financial weakness poses a risk for the U.S., but noted that any recession is fairly unlikely. 

Bernanke, who served as the Fed Chair between 2006-2014, said the Fed could use quantitative easing or other tools if the economy faces a recession.

However, Greenspan said that a recession is not the real problem, and warned against another major issue that the economy is facing -- low productivity.

"Unless we come to terms with the issue of productivity, then we have no major advance in the future," said the Fed's 13th chair who served between 1987 and 2006 under four different U.S. presidents.

Greenspan also emphasized that slow growth in productivity is holding down the economy's growth rate.

Meanwhile, Volcker reminded that there were recessions before the Fed, and "downturns are not something to get overly concerned about."

The Fed's chair from 1979 to 1987 said he also watched his successors with "great awe" facing recessions and economic hardships.

The Fed was established in 1913 and with the four chairs combined services of 73 years; their contributions have spanned over one-third of the Fed's history.