Yellen: I’m not go­ing any­where

Fed chair says she’ll stay on to guide agency dur­ing Trump pres­i­dency

Daily Local News (West Chester, PA) - - BUSINESS - By Martin Crutsinger

WASH­ING­TON >> Fed­eral Re­serve Chair Janet Yellen ap­pears un­ruf­fled by in­com­ing Pres­i­dent Don­ald Trump’s vic­tory last week.

Her re­marks to Congress Thurs­day sug­gest that the cen­tral bank is on track to raise in­ter­est rates at its meet­ing in De­cem­ber, one month be­fore Trumps takes of­fice. She said she has no plans to step down be­fore her four-year term ends in Jan­uary 2018, re­it­er­ated the Fed’s po­lit­i­cal in­de­pen­dence and vig­or­ously de­fended tougher bank reg­u­la­tions es­tab­lished in the wake of the fi­nan­cial cri­sis.

An im­prov­ing U.S. econ­omy has bol­stered the case for rais­ing in­ter­est rates, Yellen told Congress’ Joint Eco­nomic Com­mit­tee. Eco­nomic data since Fed pol­i­cy­mak­ers gath­ered in early Novem­ber re­in­forced her view that the econ­omy is mak­ing progress to­ward the Fed’s goals on em­ploy­ment and in­fla­tion. She said that at the meet­ing, she and her col­leagues be­lieved that the case for a rate in­crease “had con­tin­ued to strengthen and that such an in­crease could well be­come ap­pro­pri­ate rel­a­tively soon.”

An­a­lysts viewed Yellen’s com­ments as an ef­fort to put fi­nan­cial mar­kets on no­tice that a rate hike is likely to oc­cur at the Fed’s last meet­ing of the year on Dec. 1314. They noted that she dis­missed a sug­ges­tion that in­creased mar­ket un­cer­tainty af­ter Trump’s

elec­tion might be cause for a de­lay.

Asked whether it might be bet­ter to push back a move un­til Jan­uary, Yellen said that un­cer­tainty sur­round­ing Trump’s pro­pos­als for tax cuts and in­fra­struc­ture spend­ing could well last for a good deal longer than one month.

“Yellen’s tes­ti­mony be­fore Congress ... fur­ther ce­mented in place ex­pec­ta­tions that the Fed will hike rates next month,” said Michael Feroli, se­nior econ­o­mist at JPMor­gan.

Asked about her own fu­ture, Yellen said it was “fully my in­ten­tion” to re­main as Fed chair un­til her four-year term ends in late Jan­uary 2018. She said she could not imag­ine any cir­cum­stance that would cause her to leave early, ad­dress­ing spec­u­la­tion that she might step down once Trump takes of­fice, given his crit­i­cal com­ments of her dur­ing the elec­tion cam­paign.

The Fed raised its key

in­ter­est rate in De­cem­ber 2015 and pro­jected that it could raise rates as many as four times in 2016. But it de­ferred as the U.S. econ­omy went through a pro­longed soft-patch. The rate has re­mained in a range of 0.25 per­cent to 0.5 per­cent for the en­tire year. The rate had been at a record low near zero for seven years.

Econ­o­mists are fore­cast­ing that the Fed will raise rates by a quar­ter­point in De­cem­ber and then will boost rates two more times in 2017. Yellen stressed in her tes­ti­mony that the slow re­cov­ery and ab­sence of in­fla­tion pres­sures should al­low the Fed to move grad­u­ally in rais­ing its key rate, the fed­eral funds rate.

“Grad­ual in­creases in the fed­eral funds rate will likely be suf­fi­cient to get to a neu­tral pol­icy stance over the next few years,” Yellen said, re­fer­ring to the point where the funds rate is nei­ther pro­mot­ing eco­nomic growth nor slow­ing growth.

As mea­sured by the gross do­mes­tic prod­uct, the econ­omy grew at a 2.9 per­cent an­nual rate in the

July-Septem­ber quar­ter, the gov­ern­ment has es­ti­mated, more than twice the rate in the April-June quar­ter. The un­em­ploy­ment rate is 4.9 per­cent, around the level typ­i­cal of a healthy econ­omy, down from 10 per­cent in 2009.

In ad­di­tion to firmly stat­ing that she has no plans of leav­ing the Fed be­fore her term as chair is com­plete, Yellen also made clear that her views on bank reg­u­la­tion dif­fer from Trump’s.

Yellen gave a strong de­fense of the Dodd-Frank Act, passed by Congress in 2010 to in­crease fi­nan­cial mar­ket reg­u­la­tions in an ef­fort to pre­vent a re­peat of the 2008 fi­nan­cial cri­sis. Af­ter the coun­try lived through a “dev­as­tat­ing fi­nan­cial cri­sis,” Yellen said that “I would not want to see the clock turned back on all the im­prove­ments we have made.”

Trump and other Repub­li­cans have at­tacked Yellen and other fed­eral bank reg­u­la­tors for im­pos­ing too-re­stric­tive rules on banks, pledg­ing that they will seek to re­peal ma­jor parts of the 2010 law.

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