Senators grill Janet Yellen on Republican plans to neuter Dodd-Frank Act

Senators grill Janet Yellen on Republican plans to neuter Dodd-Frank Act

Senators grill Janet Yellen on Republican plans to neuter Dodd-Frank Act

She still expected USA and global monetary policy to remain accommodative and that the economic outlook is uncertain. She declined to make any comment on specific tax and sending policies, but reiterated the importance of improving the longer-term pace of economic growth through stronger productivity growth.

The Fed chair gave an upbeat assessment of the United States economy and signaled the central bank could raise short-term interest rates at its next policy meeting in March. There is talk of waiting too long on the interest rate hikes but there is really no mention of how the Fed will handle its $4 trillion or so balance sheet.

Yellen said delaying rate increases could leave the Fed's policymaking committee behind the curve and eventually lead it to hike rates quickly, which she said could cause a recession.

Asked during Tuesday's U.S. Senate hearing if there's any truth to claims that banks aren't lending, Yellen said an "extremely low number" of small businesses complained of access to credit as their main problem. Also notable was Yellen's decision to back away from the "room to run" message she stressed at times previous year, despite the modest increase in the unemployment rate.

More interest-rate hikes may be on the way if inflation keeps rising and labor markets continue to tighten.

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The central bank in December projected three rate hikes this year. In December, the Fed raised interest rates for the second time in almost a decade, to its current range of between 0.5 percent and 0.75 percent. That's about double the average growth rate of C&I loans since the FDIC first began collecting the data back in the mid-1980s.

Although Trump criticized the Fed during the campaign for keeping rates near zero, allegedly to help then-president Barack Obama, he is unlikely to look favorably on higher rates that would crimp economic growth and investment.

US equities overall are melting higher again on Tuesday, but not all stocks in the market are participating. The total personal consumption expenditures index gains of 1.6% in the 12 months ending in December was still below Federal Open Market Committee's (FOMC's) 2% objective, but it was up a percentage point from its pace in 2015. Yellen has been a staunch defender of the law.

Although, Yellen did caution if wage developments had much "direct effect" on inflation, and further noted that food/energy prices have been very volatile.

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. With a Republican in the White House, those efforts now stand a greater chance of success. With Governor Tarullo, a notable dove, departing the board, we might see Washington increasingly eager for a hand in the impending Fed merry-go-round and policies taking a cautious turn as a result.

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