Yellen Speak: Trump’s Bud­get Won’t Nec­es­sar­ily Im­pact Rates JANET YELLEN,

The Economic Times - - Finance & Commodities -

Won’t re­spond willy-nilly to Trump’s tax tweaks

New York: Fed­eral Re­serve Chair Janet Yellen re­jected sug­ges­tions that the cen­tral bank would re­spond willy-nilly to any changes in tax and spend­ing plans­byPres­i­den­tDon­aldTrump with stepped-up in­creases in in­ter­est rates.

That’s “not quite ac­cu­rate”, she told law­mak­ers on Wed­nes­day when asked about a me­dia re­port that the cen­tral bank would seek to off­set changes in fis­cal pol­icy with al­ter­ations in its own stance.

“Only if we think that it is de­mand-based and threat­ens our in­fla­tion ob­jec­tive,” would the Fed re­act with a tight­en­ing of mon­e­tary pol­icy, Yellen said.

Ap­pear­ing on Capi­tol Hill for a sec­ond day of hear­ings on the Fed’s semi-an­nual re­port to Congress, Yellen again called on law­mak­ers to fo­cus their ef­forts on rais­ing the long-run growth rate of the econ­omy, via steps that el­e­vate pro­duc­tiv­ity and in­crease the sup­ply of labour.

“There are pol­icy mea­sures that Congress and the ad­min­is­tra­tion could con­sider that would boost the ca­pac­ity of the US econ­omy,” she told the House Fi­nan­cial Ser­vices Com­mit­tee. Thetrou­ble, econ­o­mists said, is that any pack­age that the Congress and Trump ad­min­is­tra­tion are likely to agree on could in­crease de­mand in the short run while pro­vid­ing the econ­omy with a long-term sup­plysidelift.“TheFed­has­got chal­leng­ing times ahead,” said Ti­mothy Adams, pres­i­dent of In­sti­tute of In­ter­na­tional Fi­nance. “If you get a de­mand-side re­sponse and sup­ply-side re­sponse is lagged, how do you think about pol­icy?” asked Adams, a for mer Trea­sury Depart­ment of fi­cial un­der Pres­i­dent Ge­orge W Bush. — Bloomberg

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