U.S. economy is healthy enough to absorb further gradual rate increases and the slow wind down of the Fed's massive bond portfolio, said Federal Reserve Chair Janet Yellen. Fred Katayama reports.
Federal Reserve Chair Janet Yellen was on Capitol Hill to deliver the Fed's semiannual Monetary Policy Report. She said the U.S. economy is healthy enough to move forward with raising interest rates and winding down the Fed's $4 trillion bond portfolio. (SOUNDBITE) JANET L. YELLEN, CHAIR OF THE BOARD OF GOVERNORS OF THE U.S. FEDERAL RESERVE SYSTEM (ENGLISH) SAYING: "The economy will continue to expand at a moderate pace over the next couple of years, with the job market strengthening somewhat further, and inflation rising to two percent." But Yellen also cautioned low inflation could limit the central bank's options. PNC's Gus Faucher: (SOUNDBITE) AUGUSTINE FAUCHER CHIEF ECONOMIST, PNC FINANCIAL SERVICES GROUP (ENGLISH) SAYING: "Chair Yellen said today that they are watching inflation, that they are concerned about slowing in inflation, and they do think that that's going to be transitory, but certainly if we don't see inflation pick up through the rest of 2017, then I think the Fed is going to be more cautious in terms of increasing the Fed fund rates." Yellen confirmed the Fed is reviewing bank regulations with a possibility of easing some of them. She also reassured lawmakers that she strongly opposes proposals that could give elected officials influence over the central bank. Yellen's appearance on Capitol Hill came as the Trump administration mulls whether to replace her when her term ends in February. Bankrate's Mark Hamrick: (SOUNDBITE) MARK HAMRICK, WASHINGTON BUREAU CHIEF AND SENIOR ECONOMIC ANALYST, BANKRATE (ENGLISH) SAYING: "I think it's really amazing, in all the turmoil that is being seen around Washington D.C. these days, you watch Chair Janet Yellen speak, and you would think that these are quite normal times. But, as we know, these times are anything but normal. What is perhaps reassuring is that Chair Yellen is signaling as steady as she goes approach to the economy and monetary policy." In a reaction to Yellen's testimony, U.S. stocks rose, while bond yields and the dollar fell.