Yellen says Fed could raise interest rates 'relatively soon'

Record ID: 78385

  • Title: Yellen says Fed could raise interest rates 'relatively soon'
  • Date: 17th November 2016
  • Summary: WASHINGTON, D.C., UNITED STATES (NOVEMBER 17, 2016) (UNRESTRICTED POOL - Broadcasters: NONE Digital: NONE) WIDESHOT U.S. FEDERAL RESERVE BOARD CHAIR JANET YELLEN SEATED AT A HEARING OF THE U.S. JOINT ECONOMIC COMMITTEE (SOUNDBITE) (English) U.S. FEDERAL RESERVE BOARD CHAIR JANET YELLEN, SAYING: "My own judgment is looking at incoming economic data and developments thus far affecting the outlook that the evidence we've seen since we met in November is consistent with our expectation of strengthening growth and improving labor market and inflation moving up. So we indicated that the case had strengthened for an increase in the federal funds rate and to my mind the evidence we've seen since that time remains consistent with the judgment the committee reached in November. Now obviously there are many economic policies that Congress and the administration will be considering in the months and years to come and when there is greater clarity about the economic policies that might be put into effect, the committee will have to factor those assessments of their impacts on employment and inflation and perhaps adjust our outlook depending on what happens. So many factors over time affect the economic outlook." COMMITTEE ROOM (SOUNDBITE) (English) U.S. FEDERAL RESERVE BOARD CHAIR JANET YELLEN, SAYING: "My advice would be as you consider fiscal policies to keep in mind and look carefully at the impact those policies are likely to have on the economies productive capacity on productivity growth, and to the maximum extent possible, choose policies that would improve that long-run growth and productivity outlook." (SOUNDBITE) (English) U.S. REPRESENTATIVE CAROLYN MALONEY (D-NY), ASKING: "Can you envision any circumstances where you would not serve out your term as chair of the Federal Reserve?" (SOUNDBITE) (English) U.S. FEDERAL RESERVE BOARD CHAIR JANET YELLEN, SAYING: "No I cannot. I was confirmed by the Senate to a four-year term which ends at the end of January of 2018 and it is fully my intention to serve out that term." COMMITTEE ROOM (SOUNDBITE) (English) U.S. REPRESENTATIVE CAROLYN MALONEY (D-NY), ASKING: "I ask you very quickly, do you have concerns that the repeal would make another financial crisis more likely?" (SOUNDBITE) (English) U.S. FEDERAL RESERVE BOARD CHAIR JANET YELLEN, SAYING: "I certainly would not want to see all the improvements that we have put in place, I wouldn't want to see the clock turn back on those because I do think they're important in diminishing the odds of another financial crisis." COMMITTEE ROOM (SOUNDBITE) (English) U.S. FEDERAL RESERVE BOARD CHAIR JANET YELLEN SAYING: "There is clear evidence of better outcomes in countries where central banks can take the long view and are not subject to short-term political pressures. Sometimes central banks need to do things that are not immediately popular for the health of the economy. And we've really seen terrible economic outcomes in countries where central banks have been subject to political pressure." COMMITTEE ROOM VARIOUS OF U.S. SENATOR DAN COATS, CHAIRMAN OF THE JOINT ECONOMIC COMMITTEE (R-IN), SHAKING HANDS WITH YELLEN VARIOUS OF YELLEN LEAVING COMMITTEE ROOM
  • Embargoed: 2nd December 2016 18:28
  • Keywords: Janet Yellen Federal Reserve interest rates economy monetary policy
  • Location: WASHINGTON, D.C., UNITED STATES
  • City: WASHINGTON, D.C., UNITED STATES
  • Country: USA
  • Topics: Budget/Taxation/Revenue,Government/Politics
  • Reuters ID: LVA00158U3ZGN
  • Aspect Ratio: 16:9
  • Story Text: Donald Trump's election has done nothing to change the Federal Reserve's plans for a rate increase "relatively soon," Fed Chair Janet Yellen said on Thursday (November 17) in Congressional testimony that included a pledge to serve out her term.
    Yellen said the Fed would change its outlook as necessary as the new administration rolls out plans for perhaps hundreds of billions of dollars in tax cuts and additional government spending, and suggested the new government keep in mind in its planning that the U.S. is near full employment and inflation may be rising.
    "Markets are anticipating...a fiscal package that involves a net expansionary stance of policy and that in a context of an economy that is operating reasonably close to maximum employment with inflation heading back to 2 percent," Yellen said, suggesting new programs focus on "policies that would improve...long run growth and productivity."
    She also cautioned against any effort to "turn back the clock" on the Dodd Frank financial regulations approved following the 2007 to 2009 financial crisis because that could make a repeat more likely.
    But for the time being, Yellen said, incoming economic data justified a rate hike "relatively soon" and, absent any dramatic changes, a gradual pace of hikes after that.
    So far she said there was little risk the Fed had fallen behind the curve and would lose control of inflation.
    "The evidence we have seen since we met in November is consistent with our expectation of strengthening growth and improving labor markets and inflation moving up," Yellen said. "The risk of falling behind the curve in the near future appears limited."
    However the chair also acknowledged the uncertainty that may lie ahead as President-elect Trump rolls out his program.
    "When there is greater clarity about the economic policies that might be put into effect the (Federal Open Market Committee) will have to factor those assessments of their impact on employment and inflation and perhaps adjust our outlook," Yellen said.
    It is also uncertain how she will interact with a new president who at turns during the campaign spoke favorably of the Fed's low rate policies, said he would replace Yellen when her term expires, and accused the Fed of acting poetically to help Democratic nominee Hillary Clinton.
    Asked directly by a member of the Joint Economic Committee, Yellen said she planned to serve out her term as chair, which ends in 2018.
    She also repeated the consensus among central bankers that remaining clear of politics was central to their job - a message the Fed has repeated to Congressional Republicans who have argued for closer oversight of monetary policy.
    "There is clear evidence of better outcomes in countries where central banks can take the long view," Yellen said. "Sometimes central banks need to do things that are not immediately popular for the health of the economy."
    The Fed may face pressure, given Republican control of the White House and both chambers of Congress, to hew to a more mathematical formula for setting rates, something central bankers in generally argue should not fully displace their judgment.
    Yellen spoke on a day when fresh economic data showed continuing economic momentum, with consumer prices posting their largest gain in six months, new home construction soaring and news claims for unemployment benefits near 43-year lows.
    The data underscored Yellen's generally upbeat assessment of where the country stands. There remains "room to run" in the U.S. recovery, Yellen said, and rate increases can likely proceed on a gradual basis. But she noted that wages were rising, growth had accelerated over the second half of the year, and the world economy was on a firmer footing than it had been in recent months when uncertainty about China and Europe had caused the Fed to postpone its rate increase plans.
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