Yellen: Growth is 'quite disappointing' - but that's not the Fed's fault

But she said the Fed also recognizes the dangers of waiting too long to tighten credit.

Until then, the Fed had left its key rate unchanged at a record low - near zero -for seven years to energise an economy pummelled by the most severe recession in decades.

She added, "The economic outlook is uncertain, and monetary policy is not on a preset course".

The dollar stumbled against major currencies overnight after U.S. President Donald Trump's national security advisor Michael Flynn quit under scrutiny over whether he discussed the possibility of lifting U.S. sanctions on Russian Federation before Trump took office. She said the Fed recognizes that sharp changes in tax policy and government spending could influence the central bank's decisions.

Federal Reserve Chair Janet Yellen acknowledged that the economy is weak, but said Fed policies have been a help, not a hindrance.

Analysts at Barclays said there was "no urgency" for the Fed to raise rates in March.

The exam, known as the Comprehensive Capital Analysis and Review (CCAR), is just one of two studies that the central bank conducts yearly.

China's headline CPI and PPI rose 2.5% and 6.9% respectively, higher than the market forecast of 2.4% and 6.3%.

Trump has said his goal is to double economic growth, as measured by the gross domestic product, from the lackluster 2 percent annual rate that's prevailed since the Great Recession ended in 2009 to a robust 4 percent rate or better.

President Donald Trump has announced a rollback of financial regulation with few details and there is no clarity on the size and scope of the tax cuts he has promised, while possible new taxes on imports and increased infrastructure spending could boost inflation. "While the market had expected a strong rhetoric on improving economic conditions, the push to hasten the next rate hike had been unexpected".

"It's a hard situation for the Fed to be in", said Paul Ashworth, chief USA economist at Capital Economics in Toronto.

Yellen pointed out that since the recession, the USA has bounced back faster than Europe did after the "headwinds" weighing on the global economy.

Trump and congressional Republicans want to roll back some of the rules imposed on US banks in the aftermath of the financial crisis. Yellen may be prompted by Democrats to offer a vigorous defense of the 2010 law that imposed a raft of new obligations on banks aimed at making the financial system safer, but many of them seen as unnecessarily harsh by bankers who have the ear of the party in power.

Senate Banking Committee Chairman Mike Crapo said Tuesday "it is time to reassess what is working and what is not" with financial regulations and to "strike the proper balance" between safety and economic growth. He could reveal some of his thinking on those issues through his opening statement or his questions for Yellen.

But Federal Reserve Chair Janet Yellen told members of the House Financial Services Committee on Wednesday that she remained strongly opposed to imposing limits on the Fed's independence. The open seats - and especially the vice chair of bank supervision post - will enable Trump to quickly transform the Fed in keeping with his ideas on deregulation (though the Senate could slow the process during confirmation).

The numbers "exceeded expectations and should feed into the narrative that the economy is improving and the Fed should continue raising rates", said Craig Erlam at Oanda.

  • Zachary Reyes