Yellen says interest rates may need to be raised as the economy recovers

Treasury Secretary Janet Yellen said higher interest rates may be needed to prevent the economy from overheating given the large investment proposed by the Biden administration. Rebuilding national infrastructure And rebuild that workforce.

Comments aired online at the Atlantic Future Economy Summit on Tuesday from some economists and businesses that the United States is in a period of higher inflation as stimuli flow through the economy and consumers start spending again. It is issued amid growing concerns about.

The Treasury Secretary has no role in setting interest rate policies. It is the scope of the Federal Reserve System, which is independent of the White House.

However, the words of former Fed Chair Janet Yellen are quite important, and her comments were confiscated by investors and critics who said she was improperly affecting her previous monetary policy portfolio. .. Yellen said in another statement later on Tuesday that he respected the independence of the central bank and made no recommendations.

After Mr Yellen’s first comment, the stock market, which had fallen in early trading, fell further. Shortly before noon, the S & P 500 fell 1.5% to its worst level of the day. The stocks of some high-growth tech companies, which are particularly sensitive to the risk of rising interest rates, were hit hard and squeezed in the market. However, the Good Equity Index cut these losses in half in the afternoon, dropping trading days by just 0.7%.

Federal Reserve Board Chair Jerome H. Powell said last month that the central bank is unlikely to raise interest rates this year, officials said. I want to see more healing The US economy will consider withdrawing support by delaying the purchase of government-sponsored bonds and raising borrowing costs.

While the Federal Reserve is monitoring signs of inflation, Powell and other Federal Reserves said they believed the price surge was temporary.On Monday, Federal Reserve Bank of New York Governor John C. Williams While the economy is recoveringIn order for the Fed’s policy-making committee to “change its monetary policy stance,” “the data and conditions we are currently looking at are almost inadequate.”

Yellen has not predicted a significant rise in interest rates near zero since March 2020. However, he said some “moderate” rises may be needed as the economy recovers from the pandemic downturn and the administration is pushing for infrastructure. Other investments aimed at increasing US competitiveness and productivity.

Yellen may need to raise interest rates somewhat to prevent the economy from overheating, even though the additional spending is relatively small compared to the size of the economy. ” Handles strong spending as proposed by the Biden administration.

“Thanks to these, I think our economy will grow faster,” Yellen said of investment proposals such as R & D expenses.

Biden administration proposed Spending about $ 4 trillion in 10 years Then pay the plan by raising taxes on businesses and the rich.

Yellen’s comment raised some criticisms on Tuesday among those who believed she was pushing her limits with an emphasis on monetary policy.

“The Treasury shouldn’t talk about the Fed’s policy rate, and the Fed’s governor shouldn’t talk about the US dollar policy,” said Treasury Secretary during the Bush administration and Tony Fratto, a former White House employee. Said on twitter..

Co-authored Duke University economist Francesco Bianchi 2019 research treatise Yellen commented on the impact of former President Donald J. Trump’s tweet on the Fed’s perception of independence: “We are working hard to convince the market that the Fed will maintain low interest rates. It’s a shame. ” But he didn’t believe that Yellen’s remarks were actually inappropriate.

It’s unclear whether comments would be considered central bank intervention, as Yellen explained what she thought would happen when the economy recovered and the Biden administration implemented its policy. ” Bianchi said in an email. “In other words, she didn’t” recommend “the Federal Reserve to comply with certain policy provisions, but she seemed to be thinking about how interest rates would behave as the economy improved. “

When asked about Yellen’s comments, White House spokesman Jen Psaki said the Treasury Secretary tried to tell the Fed what to do in her comments on interest rates and hindered central bank independence. He said he didn’t.

“Of all, I think Yellen certainly understands the role of independence and the Federal Reserve. How she simply answers questions and balances decisions here. I think I was telling you, “said Mr. Pusaki.

Yellen reiterated his feelings at the Wall Street Journal CEO Council event on Tuesday afternoon. She said she hadn’t prescribed a rate hike and rejected the idea of ​​trying to violate the Fed’s independence.

“I’ll make it clear, that’s not what I predict or recommend,” Yellen said of raising interest rates. “If anyone appreciates the Fed’s independence, I think it’s me.”

Matt phillips Contribution report.

Yellen says interest rates may need to be raised as the economy recovers

Source link Yellen says interest rates may need to be raised as the economy recovers

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