Yellen to complete term despite Trump’s criticism

Yellen to complete term despite Trump’s criticism

Washington:

US Federal Reserve Chair Janet Yellen said she planned to serve out her full term despite President-elect Donald Trump’s past criticism of her performance.
“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,” Yellen told lawmakers on Thursday before the Joint Economic Committee of US Congress, Xinhua news agency reported.

In her first public remarks since Trump was elected to the White House, Yellen stressed the importance of central bank independence, warning that “we’ve really seen terrible economic outcomes in countries where central banks have been subject to political pressure.”

“It’s critically important that a central bank have the ability to make judgments about how best to pursue those goals while being accountable for explaining its decisions and transparent in its decision-making,” she said.

Trump had frequently criticized Yellen during the presidential campaign, accusing her of keeping interest rates low to help support President Barack Obama and create a “false” economy.

He had also vowed to replace Yellen with a Republican when her term expires in 2018.

Responding to a question about financial market moves since the US presidential election, Yellen said markets were expecting a fiscal stimulus package from the Trump administration and the Republican-dominated Congress.

“My interpretation would be that markets are anticipating that you will ultimately choose a fiscal package that involves a net expansionary stance of policy,” she said, noting that the US dollar index had strengthened and longer-term Treasury yields were up about 40 basis points since the election.

“In a context of an economy that’s operating reasonably close to maximum employment, with inflation heading back toward 2 per cent, that such a package could have inflationary consequences that the Fed have to take into account in devising policy, and that the market responses are consistent with that view,” She noted.

Yellen said in her testimony that an increase in interest rates could well “become appropriate relatively soon” if incoming data provide some further evidence of continued progress toward the central bank’s objectives. That raised market expectations of a rate hike at the Fed’s next policy meeting on December 13-14.

Yellen also warned of the risks of keeping interest rates for too long. She said that if the central bank delays rate hikes for too long, it could force the Fed to tighten rates relatively abruptly and could encourage excessive risk-taking and ultimately undermine financial stability.

–IANS

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