Published: Thu, February 16, 2017
Finance | By Laverne Griffith

Janet Yellen: Delaying interest rate hikes "unwise"

Janet Yellen: Delaying interest rate hikes

The Fed chairwoman painted a largely positive picture of the United States economy but warned that "changes in fiscal policy or other economic policies could potentially affect the economic outlook". "They just can't get any money because the banks just won't let them borrow because of the rules and regulations of Dodd-Frank". Warren asked for a Wall Street Journal article on the record profits being recorded by Wall Street banks to be entered into the record of the day's hearing.

Sen. Warren also prompted Yellen to comment on an assertion by top Trump economic advisor Gary Cohn, and former Goldman Sachs top banker, that banks, as a result of Dodd-Frank, have been forced to hold larger reserves that can not be leant to borrowers. "I can tell you that each meeting is live", she said.

That didn't stop some senators from continuing to claim that it was obviously killing lending, small banks, and by extension small businesses. The proposals are expected to include deep tax cuts, stimulus spending, trade actions and deregulation.

Rate-sensitive shares tumbled, while banks advanced as USA equities held near records.Wednesday's data lifted the odds for a Fed rate hike in March jumped to 42 percent from 30 percent two days ago, helped by Fed chair Janet Yellen's testimony that the central bank doesn't need to wait for Donald Trump to outline plans on fiscal stimulus before resuming rate hikes.

Speaking to the US Congress on Tuesday, the Federal Reserve chairwoman said it was too early to know what policy changes will be put in place by the Donald Trump's administration, or how their economic effects will unfold.

The US Fed's policy-setting Federal Open Market Committee (FOMC) raised rates in December for only the second time in a decade, but kept rates steady in January.

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The Trump administration stated its economic policy goals earlier, saying they were created to improve business investment and deal-making while promoting economic growth and higher inflation. "Does it make sense to remove two consumer protections for every new consumer protection?"

Sen. Sherrod Brown (D-OH), the committee's ranking Democrat, pushed back on that thinking, saying that "many of my Republican colleagues are dead set on going far beyond reasonable adjustments and seeking to repeal reforms that are key to preventing the next devastating financial crisis".

Yellen's hawkish tone dovetailed with recent comments from other Fed officials.

"Well, some of the policies that are being discussed might well raise deficits and, in that context, they may also have impacts on economic growth..."

The greenback was initially under pressure following the resignation of President Donald Trump's national security adviser, Michael Flynn, over revelations he had discussed U.S. sanctions against Moscow with the Russian ambassador to the United States before Trump took office.

Yellen is scheduled to testify today before the House Finances Services Committee.

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