Janet Yellen: Delaying interest rate hikes "unwise"

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U.S. Federal Reserve Chair Janet Yellen told a congressional committee Tuesday, that she expects the economy to continue its modest expansion.

Waiting too long to raise rates "would be unwise" and could eventually force the Fed to raise rates rapidly to catch up, Yellen said.

The highlight of Fed Chair Yellen's testimony thus far was perhaps her comment on how it would be short-sighted to not raise rates multiple times this year.

Many economists caution that the pace of rate increases could change quickly depending on how much success Trump has in getting his economic initiatives enacted.

Financial markets specialist Professor James Angel from Georgetown University explained why: "Often politicians will want central banks to do things that are short term expedient, but long term risky for the economy".

Yellen said the Fed did not increase the rate earlier this month "but reiterated that it expects the evolution of the economy to warrant further gradual increases in the federal funds rate to achieve and maintain its employment and inflation objectives".

In a hearing before the Senate Banking Committee Tuesday, they pressed Yellen on the economic impact of everything from tax reform and the possible repeal of the Affordable Care Act, to immigration and even climate change. During the financial crisis, the Fed purchased large-scale assets to hold down long-term interest rates.




She went on to say that a rate increase will be likely be appropriate at one of the forthcoming meetings if the economy remains on track. US stock indexes opened slightly lower Tuesday morning after breaching record highs on Monday. His resignation, effective in early April, will create a third vacancy on the seven-member board for Trump to fill. On Jan. 31, the vice chair of the House Financial Services Committee - one of the two committees before which Yellen will testify - sent the Fed chair a letter urging her organization to stop negotiating with other countries over global regulatory standards. The funds rate is now targeted in the 0.5 percent to 0.75 percent range. With stock markets at record levels, investors closely eyed her remarks for any clues about what will send rates higher and the central bank's outlook and expectations on fiscal policy under President Donald Trump's administration.

But based on her comments on Tuesday, Yellen and Trump officials are likely to disagree about precisely what to do next. Markets are still betting on the first hike in June.

Other proposals by Congress have suggested tying the Fed's monetary policy decisions to a mathematical formula.

On how she'll "deal with" three new Fed governors to be appointed by Trump, as Sen.

Yellen agreed an executive order from the president calling for a review of the usefulness of current polices and regulations could be helpful.

Over the past four decades, the U.S. Federal Reserve has steadily gained power and independence in its policymaking.

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