Yellen: Expect Fed to raise rates in coming months
Federal Reserve Chair Janet Yellen pointed Tuesday to a solid U.S. job market and economy and said the Fed will likely resume raising interest rates in the next few months. But with uncertainties surrounding President Donald Trump’s proposals, Yellen said the Fed still wants to keep assessing the economy.
Testifying to a Senate committee, Yellen noted that Fed officials forecast in December that they would raise rates three times in 2017. That would mark an acceleration from 2015 and 2016, when they boosted rates once each year.
“Precisely when we would take an action, whether it is March, or May or June ... I can’t tell you which meeting it would be,” Yellen said in response to a question. “I would say that every meeting is live.”
Though Yellen didn’t rule out a rate hike at the Fed’s next meeting in mid-March, most economists and investors think the next one will occur in June.
Until then, the details of Trump’s ambitious proposals – for tax cuts for individuals and businesses, greater spending on infrastructure projects, changes to trade deals and a relaxation of regulations – could remain hazy.
“With the uncertainty over fiscal policy likely to last for at least another few months, that means the Fed will probably be on hold until June,” said Paul Ashworth, chief U.S. economist at Capital Economics.
Other analysts say they think that while three Fed rate hikes will occur in 2017, all of them may happen in the second half of the year.
In her first congressional appearance since Trump took office, Yellen avoided making critical observations of the president’s economic ideas. During the campaign, Trump was at times harshly dismissive of Yellen. At one point, he had declared that she should be “ashamed of herself” for, in his view, keeping rates low to favor Democrats.
In her remarks, Yellen did caution that any economic initiatives that significantly swell long-term budget deficits would likely slow growth. But she offered support for part of Trump’s agenda: His efforts to make it easier for smaller banks to lend, in part by liberating them from some rules imposed by the Dodd-Frank financial overhaul law.