The Fed Will Raise Interest Rate Gradually, Janet Yellen Says
U.S. Federal Reserve Bank Chairwoman Janet Yellen in the hearing with Senate Banking Committee prompted the Senate about interest rate hike. She said that hesitation to raise the interest rate is unwise.
In the hearing, she repeated the caution which has been issued by the Fed as reported by CNBC. She said the central bank will increase interest rate gradually to keep accommodating the policy.
Yellen also prompted the Fed next meeting in March will announce a possible interest rate hike. She said delaying the rate hike will make the policy making committee of the Fed to be behind the curve of economic growth. That will eventually lead to a quick hike rates that would bring recession.
“The committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations,” She explained the agenda of the next month's committee meeting as quoted by Reuters. However, she assured that the Fed will not raise the interest rate three times this year.
The expected rate hike in March will be the third time in three years, after December 2015 and last year. She also mentioned the central bank intention to reduce the size of the bond portfolio. During the financial crisis, the central bank inflated the bond portfolio in order to keep the rates at low level.
Her appearance is the first time since the President Trump took the office. Recently, President Trump has declared financial regulation reform which aimed to increase the competitiveness of the U.S. product and revive the American manufacturing. President Trump has introduced a new border adjustment tax, imposed on the product made overseas and sold in the U.S.
Yellen suggested policy makers to consider to raise the efficiency level of the U.S. businesses. She said that the policy has slightly increase the inflation rate, but she noted the inflation rate stay low.
Watch the report from CNBC regarding Yellen’s hearing with the Senate which she said the U.S. economy continues to improve below: