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Yellen: Fed could delay interest rate hikes

From NAM’s blog Shopfloor

Federal Reserve Chair Janet Yellen testified before the House Financial Services Committee on Wednesday, with Bloomberg News (2/10, Miller) reporting Yellen “suggested that the central bank might delay, but not abandon, planned interest rate increases in response to recent turmoil in financial markets.”

Yellen “made clear that the policy-setting Federal Open Market Committee remains committed to gradually raising rates, after increasing them in December for the first time in nine years.” The New York Times (2/10, Appelbaum, Subscription Publication) says Yellen “sounded more worried than at her last public appearance, in December,” saying, “Financial conditions in the United States have recently become less supportive of growth. … These developments, if they prove persistent, could weigh on the outlook for economic activity.” However, she “said it was too soon to assess any damage, and…suggested that it was also too soon to say whether the Fed would raise interest rates in March.”

The Washington Post (2/10, Mui) reports that while Yellen “cautioned that continued turmoil could dampen US growth and acknowledged the risks from a sustained slowdown in emerging economies,” she “said that a slowdown in US growth was more likely than an outright recession and that she did not expect the Fed would cut rates any time soon.”

The AP (2/10, Crutsinger) notes that Yellen “did concede…that negative rates, which central banks in Japan and Europe have recently imposed, are a tool the Fed has at least studied.”

The Los Angeles Times (2/10, Puzzanghera, Lee) reports Yellen “tried to calm financial markets while keeping all options on the table.” Yellen said the Fed is “prepared to act” if “economic conditions worsen,” noting that “monetary policy is not on a pre-set course.”

Reuters (2/10, Schneider, Dunsmuir) similarly says that while investors see a rate hike this year as very unlikely, Yellen kept the Fed’s options open.

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