According to the Chair of the Federal Reserve, it would be unwise to keep on delaying interest rate hikes. The other day, Janet Yellen told the Board of Directors of the Federal Reserve that they might consider another interest rate hike during the forthcoming FOMC meeting.
At the same time, Trump’s administration seems to be uncertain about the U.S. economic policy, which is something Janet Yellen is concerned about. She says that if the Fed fails to raise the rates this time, they will start lagging behind the trend. As a result, this may trigger a sharp interest rate hike, which is callable of triggering another economic recession in the USA. That’s why she thinks that delaying the interest rate decision would be a bad idea with unpleasant results.
Janet Yellen hopes that the American labor market will keep on strengthening and recovering and the inflation rate will reach the 2% target. By the way, over the next meetings, the FOMC is going to figure out whether the labor market and inflation figures are complying with those expectations. If that’s the case, another interest rate hike will be appropriate.
However, she didn’t mention whether the Fed Reserve thinks that the current state of the U.S. economy will be good enough to allow 3 interest rate hikes in 2017. She also didn’t specify whether the Fed is really determined to raise the rates during the nearest FOMC meeting in March or wants to do it in July as previously expected by most experts.
Janet Yellen assumes that any changes to the fiscal policy and other economic policies may affect economic forecasts in the future. For now, it’s unclear what those changes are going to be and how they are going to affect the American economy.
As for Donald trump, he promised to cut the legal limitations in the financial sector but didn’t specified the changes. At the same time, the scale of the tax cuts promised by President Trump are also unclear at this point while the possibility of introducing new import taxes and higher infrastructural spending may spur inflation. That’s why the Fed seems to be waiting for more clarity from Trump’s administration before starting to act accordingly.
