Yellen Sees More Rate Hikes With Economic Growth

US Retail Sales, Inflation Rise

In her testimony, Yellen also said that the USA central bank would decide at its upcoming monetary policy meetings - due to be held on March 14 and 15 - whether to raise the key interest rate once inflation rises closer to the Fed's two percent target and as employment continues to strengthen.

While Yellen and her fellow members of the central bank's policy body chose not to raise the federal funds rate-a bank-to-bank loan rate closely followed by mortgage, credit card and other interest rates-following a meeting that ended February 1, she suggested after the Fed raised the rate in December that Americans could see as many as three increases in 2017.

With a year left in her current term as Fed chair, Yellen is seeking to guide rates carefully upward in synch with a slowly improving economy while wrestling with the uncertainty posed by the Trump administration's still undetailed plans to boost economic growth. On the campaign trail, Trump promised tax cuts, higher spending on defense and infrastructure and regulatory reform.

Yellen responded calmly to heated opinions repeatedly voiced from committee members, especially on the topic of the Dodd-Frank Act, a set of regulations created in response to the Great Recession in 2008 and which President Donald Trump aims to dismantle. Germany's DAX was up 0.2 percent to 11,795.

More evidence that inflation has taken hold in the US economy spurred bets that the Federal Reserve is clear to raise interest rates as soon as March, fueling a selloff in Treasuries and lifting the dollar.

Now if Yellen had been trying to prepare investors for a possible March rate hike by the Fed, her message backfired badly.

The exam, known as the Comprehensive Capital Analysis and Review (CCAR), is just one of two studies that the central bank conducts yearly. She reiterated some of the language from the Fed's last policy meeting that adopted a more hawkish outlook, while indicating that she is concerned about the possibility of holding off rate hike for too long. Comments he made late last week reiterating his commitment to major tax relief helped drive up stock indexes to fresh record highs.

"Inflation, or a lack thereof, has always been a problem for the Fed with policymakers clearly wanting to begin and then speed up the tightening process but it seems, gradually, pressures are building", he added.

Janet Yellen, chair of the U.S. Federal Reserve, speaks during a Senate Banking, Housing, and Urban Affairs Committee hearing in Washington, D.C., U.S., on Wednesday, Feb. 14, 2017. She appears today before the House Financial Services Committee, where she is expected to face tough questioning from Republican lawmakers.

Treading carefully but not commenting on specific policies-of which there are few in any case-Yellen responded to a question with a warning that United States fiscal outlook has been "a long standing problem". Democrats have defended the law as making the financial system safer.


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