The US Federal Reserve seems just as in the dark as the rest of the world outside over President Donald Trump’s economic policies.
Fed chair Janet Yellen told the US Senate Banking Committee that she and her colleagues intend to raise American interest rates this year regardless of what Trump may be planning.
The rise is expected to ratchet the rate up from 0.75% to nearer 1% by the end of 2017.
No love is lost between Yellen and Trump, who is widely expected to replace her within a few months with someone more attuned to his way of thinking.
She cited improving employment and another jump in inflation as cues for a rate rise which is expected to come at next month’s meeting of the central bank.
Swipe at Trump
The dollar surged to a three-week high against the lacklustre pound and euro because of her words. Wall St also rallied to maintain a rising trend.
“Waiting too long to remove accommodation would be unwise, potentially requiring policymakers to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession,” she said.
Taking a swipe at Trump without naming him, she went on to say the Fed will make decisions based on evidence rather than speculation.
“Considerable uncertainty surrounds the economic outlook, with possible changes in US fiscal and other policies,” she said.
“The Fed would not base current policy on speculation about what may come down the line.
“While it is not my intention to opine on specific tax or spending proposals, I would point to the importance of improving the pace of longer-run economic growth and raising American living standards with policies aimed at improving productivity.”
She refused to warn the markets about when the next rate rise is due.
“I can’t tell you which meeting it would be. I can tell you that each meeting is live,” she said.
The last hike was in December, the first for a year, raising the rate 0.25% from 0.5% to 0.75%.
The Federal reserve is independent of Trump’s economic policy when making decisions about changing official rates of interest.