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November 18, 2016

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Fed may lift rates soon: Yellen

THE Federal Reserve could raise US interest rates “relatively soon,” Fed Chair Janet Yellen said yesterday as data showing a surge in housing starts and uptick in inflation underscored her upbeat assessment of where the country stands.

In Yellen’s first remarks since the election of Donald Trump as the next president, the Fed chair indicated little had yet changed as a result of the election. She said she intends to serve out her term, which ends in 2018, and indicated the Fed remains on track to raise rates at its meeting next month.

“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.

She made no mention in her prepared statement to a congressional committee of the possibility Trump’s new administration could add tax cuts and hundreds of billions in new spending to an economy that may be gathering steam on its own.

But she did say the Fed was prepared to adjust its outlook as the new administration takes shape.

“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.

Yellen said she saw only a “limited” risk that the Fed would end up behind the curve and lose control of an inflation rate that has been frustratingly low since the financial crisis and recession of 2007 to 2009.

There is, Yellen said, still “room to run” in the US recovery, and rate increases can likely proceed on a gradual basis.


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