Fed Chair Yellen: 'Unwise' to Wait Too Long for a Rate Hike

Congressional Republicans have criticised Federal Reserve chair Janet Yellen's stewardship of the U.S. economy and urged her to halt work on financial regulation until president Donald Trump names new policymakers to the central bank.

While treading carefully and not commenting on specific policies - of which there are few in any case - Yellen responded to a question with a warning that USA fiscal outlook has been "a long standing problem".

Congress should focus on policies aimed at improving the productivity of the US economy rather than increasing short-term growth, Federal Reserve Chairman Janet Yellen told the Senate Banking Committee Tuesday.

Potter added with near-full employment, optimistic levels of small business and consumer confidence, as well as inflation moving upwards, the circumstances are such that one would expect central banks to start to nudge rates higher.

In a recent speech, Yellen hewed to a middle-ground position, saying she doesn't want to run a "hot economy" that invites runaway inflation by keeping rates low too long, but advocates raising rates gradually to avoid derailing the recovery.

Following the upcoming meeting, the Fed will have six more chances to raise the rate.

Benchmark U.S. Treasury yields US10YT=RR rose to a two-and-a-half week high of 2.524 percent after the data and were last down 9/32 in price to yield 2.5004 percent. Lest we forget, the Fed policymakers haven't factored Trump's fiscal stimulus proposals. But the Fed chair also sought to calm fears that the USA central bank might soon begin to shrink its balance sheet, which expanded dramatically during its crisis-era bond buying programs.

Two days of testimony this week from a more hawkish and confident Yellen cemented the idea among investors that the USA central bank would raise interest rates by midyear if not sooner. The Fed fund futures show, that the odds for a rate hike at the June Fed meeting is now 46.1%.

Ms Yellen testifies to the US Congress again yesterday, this time to the House of Representatives.

Yellen left open the possibility of a rate hike as early as the central bank's next policy meeting in March. In December, the Fed also forecast that it would raise rates three times in 2017.

"We will continue to coordinate with the Treasury Department, which is itself a member of several global forums related to financial services, such as the Financial Stability Board and the worldwide Association of Insurance Supervisors, as well as with the other USA supervisory agencies that participate in various worldwide forums", Yellen wrote in a February 10 letter to McHenry, who is vice chairman of the House Financial Services Committee.

  • Zachary Reyes