US Federal Reserve Chairperson Janet Yellen has ruled out any early departure from his term. In front of the Joint Economic Committee, US Congress, she stood her ground. Yellen said that Fed is on the track to raise the interest rates. She also said that election results didn’t change anything.
Yellen tried to answer the recent criticism regarding the business investments also out-rightly rejected claims of monetary policy hampering the business investment. While she described the short term investment focus among many firm as “disturbing”, but also suggested that Fed shouldn’t be blamed for weak spending of companies.
In one of the quickest hearing, Senator Coats thanked Me. Yellen and called her “star witness”. She also thanked senator for his kind words. While discussing current economic outlook and monetary policy, Yellen mentioned her ongoing stand of raising policy rates during the next month’s Fed meeting.
Yellen said that if the Federal Open Markets Committee delays in increasing the federal funds rate for too long, which in turn may end up having to tighten policy to keep the economy from significantly overshooting both of the Committee’s and Fed’s longer-run policy goals.
She also said that “Moreover, holding the federal funds rate at its current level for too long could also encourage excessive risk-taking. This will ultimately undermine financial stability”.
Ms. Yellen said that Trump’s fiscal stimulus plan of ($1 trillion spending plan) is unusual at this time. Markets expect the plan to push up inflation, encouraging the Fed to raise interest rates further. Her strong comments helped the dollar to climb up to a new 14-year high. Fed Rate rise could come “relatively soon” as data also points to a stronger economy.
The US economy is currently operating at very close to full employment. US doesn’t require any fiscal spending stimulus. The state of public finances seems a worrying point, however stimulus would involve extra spending and substantial tax cuts. This may rack up potentially trillions of dollars of additional debt.