US Fed chief stands by stance on raising interest rates

HOUSE FINANCIAL SERVICES COMMITTEE TESTIMONY

US FEDERAL Reserve Chair Janet Yellen, in a testimony before the House Financial Services Committee on Wednesday, stood by the stance she had taken on Tuesday that the central bank was on track to raise interest rates at an upcoming policy meeting.

Republicans and Democrats on the House Financial Services Committee clashed over the role the US Federal Reserve has played in helping the economy to recover from the ‘Great Recession’.

Republican lawmakers told Yellen that the Fed’s ultra-low interest rates and massive bond buying had left the economy growing at the slowest pace for any economic recovery in the post-war period. Democrats countered that the Fed’s policies had succeeded in creating nearly 16 million jobs. Yellen told the panel that the US Fed is close to achieving the two goals it has been given by Congress — promoting maximum employment and stable inflation. Yellen told members that she remained strongly opposed to imposing limits on the Fed’s independence. She cited drawbacks that she sees in allowing congressional auditors to review Fed decisions on setting rates and on reliance on a simple rule to get rates.

“I think central banks all over the world have recognised that an independent central bank that can focus on the long-term health of the economy ... gives rise to a better economic environment,’’ Yellen said.

Reuters US Federal Reserve Chair Janet Yellen at the semiannual monetary policy testimony during in Washington.