Yellen Could Stay Mum on One Big Question Today

Congress sure to ask about Fed's possible reaction to Trump's economic plan
By Newser Editors and Wire Services
Posted Feb 14, 2017 7:52 AM CST
Janet Yellen Faces 2 Tasks Before Congress
In this Thursday, Nov. 17, 2016, file photo, Federal Reserve Chair Janet Yellen testifies on Capitol Hill in Washington, before the Joint Economic Committee.   (Susan Walsh)

Federal Reserve Chair Janet Yellen faces two tasks when she delivers her semiannual testimony to Congress starting Tuesday: As always, she'll sketch a picture of how she expects the economy to fare in coming months and how the Fed's interest rate policy may unfold. (In December, the Fed forecast that it would raise rates three times in 2017.) But lawmakers are sure to press her also to spell out how the Fed might react to the ambitious economic program President Trump is preparing to unveil in the coming weeks. The proposals are expected to include deep tax cuts, stimulus spending, trade actions, and deregulation. Investors will be eager to hear whatever Yellen says about them—or doesn't say.

The AP speaks with analysts who are placing their bets on the staying-mum side of things, as the details of Trump's plans remain mostly unknown. Trump has said his goal is to double economic growth, as measured by the gross domestic product, from the lackluster 2% annual rate that's prevailed since the Great Recession ended in 2009 to a robust 4% rate or better. But Fed officials could grow concerned that a big stimulus package at this stage of the recovery, with job growth solid and unemployment below 5%, might overheat the economy and trigger unwanted inflation pressures. If that were to happen, the central bank could decide to accelerate its rate hikes. The AP has more on other questions Yellen could face, including some on the Dodd-Frank financial regulatory law. (Read more Janet Yellen stories.)

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