- Title: Fed's Yellen says rate and portfolio plans on track, cautions on inflation
- Date: 12th July 2017
- Summary: WASHINGTON D.C., UNITED STATES (JULY 12, 2017) (UNRESTRICTED POOL) FEDERAL RESERVE CHAIR JANET YELLEN ENTERING ROOM AND TAKING SEAT AS PHOTOGRAPHERS TAKE PICTURES HOUSE FINANCIAL SERVICES COMMITTEE MEMBERS (SOUNDBITE) (ENGLISH) FEDERAL RESERVE CHAIR JANET YELLEN SAYING: "We reaffirmed our 2 percent inflation target in January. We are very focused on trying to achieve our 2 percent inflation target and it is not a subject of discussion." (SOUNDBITE) (ENGLISH) HOUSE FINANCIAL SERVICES COMMITTEE CHAIRMAN JEB HENSARLING SAYING: "Thank you I will take no for an answer." (SOUNDBITE) (ENGLISH) FEDERAL RESERVE CHAIR JANET YELLEN SAYING: "The committee continues to expect that the evolution of the economy would warrant gradual increases in the federal funds rate overtime to achieve in maintaining maximum employment and stable prices." HOUSE FINANCIAL SERVICES COMMITTEE MEMBERS (SOUNDBITE) (ENGLISH) FEDERAL RESERVE CHAIR JANET YELLEN SAYING: "The FOMC and its principles for normalization of monetary policy has clearly indicated that it intends to return over time to a primarily Treasury only portfolio and that's in order not to influence." HOUSE FINANCIAL SERVICES COMMITTEE MEMBERS (SOUNDBITE) (ENGLISH) FEDERAL RESERVE CHAIR JANET YELLEN SAYING: "Now for several months running, we have seen unusually low inflation readings. As I mentioned, there appear to be some special factors that partly account for that. For example, quality adjusted prices of cell phone plans plunged several months ago and prescription drug prices also, pricing plunged. So some temporary factors appear to be at work." HOUSE FINANCIAL SERVICES COMMITTEE MEMBERS (SOUNDBITE) (ENGLISH) FEDERAL RESERVE CHAIR JANET YELLEN SAYING: "My expectation is although there will be a lag there as the general level of short term interest rates rise. That competition among banking organizations will begin to put some upward pressure on those rates and um..." HOUSE FINANCIAL SERVICES COMMITTEE MEMBERS (SOUNDBITE) (ENGLISH) FEDERAL RESERVE CHAIR JANET YELLEN SAYING: "What you're showing here represents a trend that given current spending and taxation decisions is going to lead to an unsustainable debt situation with rising interest rates and declining investment in the United States that will further harm our productivity growth and living standards. I believe the key thing that can Congress should be taking into account in designing fiscal policy is the need to achieve sustainability of this debt path over time." PAN FROM YELLEN TO HOUSE FINANCIAL SERVICES COMMITTEE MEMBERS
- Embargoed: 26th July 2017 16:24
- Keywords: Janet Yellen Federal Reserve inflation
- Location: WASHINGTON D.C., UNITED STATES
- City: WASHINGTON D.C., UNITED STATES
- Country: USA
- Topics: Government/Politics
- Reuters ID: LVA0016PEXF0N
- Aspect Ratio: 16:9
- Story Text: The U.S. economy is healthy enough for the Fed to move forward with plans to raise rates and begin winding down its massive bond portfolio, though low inflation and a low neutral rate may leave the central bank with diminished leeway, Fed Chair Janet Yellen said on Wednesday (July 12).
In what may be one of her last appearances before Congress, Yellen depicted an economy that, while growing slowly, continued to add jobs, benefited from steady household consumption and a recent jump in business investment, and was now being supported as well by stronger economic conditions abroad.
The Fed "continues to expect that the evolution of the economy will warrant gradual increases in the federal funds rate over time," Yellen said in her prepared testimony.
But she also noted that given current estimates, the federal funds rate "would not have to rise all that much further" to reach a neutral level that neither encourages nor discourages economic activity. The Fed still feels the economy needs loose, or accommodative, monetary policy, so a lower neutral rate means the Fed may feel compelled to slow the pace of rate hikes down the road.
But for now, Yellen told members of the House Committee on Financial Services that the economy remains strong enough for the Fed to continue its plans to gradually tighten policy. A question and answer session with lawmakers follows her prepared remarks.
Yellen's past appearances before the House panel have sometimes involved sharp exchanges with lawmakers who think the Fed's influence over the economy has grown too strong, and who want policymakers to be guided more closely by a mathematical rule for setting interest rates.
Her appearance comes as the Trump administration mulls whether to replace her when her term ends in February.
Following her remarks, U.S. stocks rose while yields on Treasury bonds fell and the dollar declined against a basket of currencies.
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