Yellen speak: Trump's budget won't necessarily impact rates
By Rich Miller
Federal Reserve Chair Janet Yellen rejected suggestions that the central bank would respond willy-nilly to any changes in tax and spending plans by President Donald Trump with stepped-up increases in interest rates.
That's “not quite accurate“, she told lawmakers on Wednesday when asked about a media report that the central bank would seek to offset changes in fiscal policy with alterations in its own stance.
“Only if we think that it is demand-based and threatens our inflation objective,“ would the Fed react with a tightening of monetary policy , Yellen said.
Appearing on Capitol Hill for a second day of hearings on the Fed's semi-annual report to Congress, Yellen again called on lawmakers to focus their efforts on raising the long-run growth rate of the economy , via steps that elevate productivity and increase the supply of labour. “There are policy measures that Congress and the administration could consider that would boost the capacity of the US economy ,“ she told the House Financial Services Committee. The trouble, economists said, is that any package that the Congress and Trump administration are likely to agree on could increase demand in the short run while providing the economy with a long-term supplyside lift. “The Fed has got challenging times ahead,“ said Timothy Adams, president of Institute of International Finance. “If you get a demand-side response and supply-side response is lagged, how do you think about policy?“ asked Adams, a former Treasury Department official under President George W Bush.
Federal Reserve Chair Janet Yellen rejected suggestions that the central bank would respond willy-nilly to any changes in tax and spending plans by President Donald Trump with stepped-up increases in interest rates.
That's “not quite accurate“, she told lawmakers on Wednesday when asked about a media report that the central bank would seek to offset changes in fiscal policy with alterations in its own stance.
“Only if we think that it is demand-based and threatens our inflation objective,“ would the Fed react with a tightening of monetary policy , Yellen said.
Appearing on Capitol Hill for a second day of hearings on the Fed's semi-annual report to Congress, Yellen again called on lawmakers to focus their efforts on raising the long-run growth rate of the economy , via steps that elevate productivity and increase the supply of labour. “There are policy measures that Congress and the administration could consider that would boost the capacity of the US economy ,“ she told the House Financial Services Committee. The trouble, economists said, is that any package that the Congress and Trump administration are likely to agree on could increase demand in the short run while providing the economy with a long-term supplyside lift. “The Fed has got challenging times ahead,“ said Timothy Adams, president of Institute of International Finance. “If you get a demand-side response and supply-side response is lagged, how do you think about policy?“ asked Adams, a former Treasury Department official under President George W Bush.
