Federal Reserve Board ChairwomanJanet Yellen told House lawmakers Tuesday in her prepared remarksthat she expects a great deal of continuity in the Federal OpenMarket Committee's approach to monetary policy.

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However, Yellen conceded during the question and answer sessionwith lawmakers that the Fed would pause its tapering of assetpurchases if there was a notable change in the economic outlook,and increase asset purchases again if there were “a significantdeterioration in the outlook — either for the job market or ifinflation would not be moving back up over time.”

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While receiving mostly congratulations from the lawmakers intaking her new post, Rep. Jeb Hensarling (R-Texas) chairman of thecommittee, reminded Yellen of his committee's yearlong examinationof the Fed via its Federal Reserve Centennial OversightProject.

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“Any agency or bureau of government that is 100 years oldprobably needs a good check-up, especially one as powerful asyours,” Hensarling said. “And I remind all, independence andaccountability are not mutually exclusive concepts.”

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In her first report on monetary policy, Yellen told members ofthe House Financial Services Committee Tuesdaythat “If incoming information broadlysupports the committee's expectation of ongoing improvement inlabor market conditions and inflation moving back toward itslonger-run objective, the committee will likely reduce the pace ofasset purchases in further measured steps at future meetings.”

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She then took a line from her predecessor, Ben Bernanke, in hislast speech by stating that purchases are not on a preset courseand that “the committee's decisions about their pace will remaincontingent on its outlook for the labor market and inflation aswell as its assessment of the likely efficacy and costs of suchpurchases.”

At his last pressconference in early January, Bernanke said after the December FOMCmeeting that further tapering will be data dependent. However, hesaid he anticipated that the Fed would probably do a measuredreduction at each meeting in 2014.

Jim O'Sullivan, chief U.S. economist at High FrequencyEconomics, said that Yellen “expressed cautious optimism aboutgrowth, with no sign of concern about some of the weaker datarecently while downplaying the volatility in markets.”

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Indeed, Axel Merk, president and CIO of Merk Investments LLC,noted in his Tuesday commentary that on Yellen's first day onthe job, the Dow Jones Industrial Average dropped 326 points;10-year Treasury yields fell to 2.58%.

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“While a day does not set a trend, let alone create a legacy,there is no honeymoon for Janet Yellen,” Merksaid. ”Volatility, seemingly absent in 2013, is back, withmajor implications for investors' portfolios.”

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While Yellen expressed disappointment with the past two jobsreports, she said that “we can't jump to conclusions” about whatthose reports mean — noting that cold winter weather was likely acontributing factor.

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She added that the FOMC would look at a “broad range of data” atits March meeting to assess the significance of the jobs reports.“We're not back to maximum employment,” Yellen said. “However,there has been substantial job creation. But we have further togo.”

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The unemployment rate has fallen “nearly a percentage pointsince the middle of last year and 1-1/2 percentage points since thebeginning of the current asset purchase program,” she said. It was6.6% in January.

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“Nevertheless, the recovery in the labor market is far fromcomplete,” with the unemployment rate “still well above levels thatFOMC participants estimate is consistent with maximum sustainableemployment.”

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Yellen summed up her remarks by stating: “Since the financialcrisis and the depths of the recession, substantial progress hasbeen made in restoring the economy to health and in strengtheningthe financial system. Still, there is more to do. Too manyAmericans remain unemployed, inflation remains below our longer-runobjective, and the work of making the financial system more robusthas not yet been completed.”