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Fed: Too early to gauge impact

2 years ago

Federal Reserve Board Chair Janet Yellen testifies in Capitol Hill, Thursday.

BY MARTIN CRUTSINGER The Associated Press WASHINGTON – Federal Reserve Chair Janet Yellen cautioned Thursday that global economic pressures pose risks to the U.S. economy but said it’s too soon to know whether those risks are severe enough to alter the Fed’s interest-rate policies. Yellen said the Fed will determine at its next meeting in March how much economic weakness and falling markets around the world have hamstrung U.S. growth. She also acknowledged that the central bank has been surprised by how much energy prices have dropped and the U.S. dollar has risen in value. Yellen’s comments to the Senate Banking Committee came on the second day of her semiannual testimony to Congress. On Wednesday, she had cautioned that global pressures could depress the U.S. economy’s growth and slow the pace of Fed rate hikes. In her appearance Thursday, Senator Charles Schumer challenged Yellen on the pace of future rate hikes. Schumer argued that pushing ahead too quickly with further rate hikes would be a mistake given that wage growth is showing signs of picking up. The senator said another concern was that rate increases could further boost the dollar’s value at a time when a strong dollar has been depressing the exports of U.S. manufacturers. “I am concerned that further movement by the Fed to raise rates could snuff out the embers of wage growth,” Schumer told Yellen. “I am less worried about inflation and more worried about slow wage growth.” Yellen said that in December, when the Fed raised its key policy rate by a quarter-point after it had remained at a record low near zero for seven years, there were signs that wage growth was improving. “We expect that wages will move up at a somewhat faster pace” now that the unemployment rate has fallen from levels reached during the recession, she said. Yellen repeated that the Fed had studied the prospect of deploying negative rates in 2010 but had decided then not to use them to try to boost the economy.

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