WASHINGTON Feb 14 The Federal Reserve will
likely need to raise interest rates at an upcoming meeting, Fed
Chair Janet Yellen said on Tuesday, although she flagged
considerable uncertainty over economic policy under the Trump
Yellen said delaying rate increases could leave the Fed's
policymaking committee behind the curve and eventually lead it
to hike rates quickly, which she said could cause a recession.
"Waiting too long to remove accommodation would be unwise,"
Yellen said in prepared remarks before the U.S. Senate Banking
Committee, citing the central bank's expectations the job market
will tighten further and that inflation would rise to 2 percent.
"At our upcoming meetings, the committee will evaluate
whether employment and inflation are continuing to evolve in
line with these expectations, in which case a further adjustment
of the federal funds rate would likely be appropriate."
Yellen did not say if Fed policymakers expected the economy
would warrant three interest rate increases this year, as they
last signaled in December. Nor did she give indications whether
the first rate hike of the year might come at its next meeting
in March or at the subsequent June meeting, which is when most
analysts expect a rate increase.
Yellen was appearing in Congress for the first time since
Republicans took control of the White House and both houses of
the legislature and she nodded to the uncertainties over the
direction of U.S. economic policy.
"Changes in fiscal policy or other economic policies could
potentially affect the economic outlook," she said. "It is too
early to know what policy changes will be put in place or how
their economic effects will unfold."
President Donald Trump has announced a rollback of financial
regulation with few details and there is no clarity on the size
and scope of the tax cuts he has promised, while possible new
taxes on imports and increased infrastructure spending could
Inflation has remained persistently below the Fed's 2
percent target for several years and Yellen said it was
"reassuring" that market-based measures of inflation
compensation had recently risen, though she noted they remain
Yellen said she did not want to weigh in on specific tax and
spending proposals, but she urged policymakers to consider the
importance of making U.S. businesses more efficient, which
economists believe is essential to raising living standards over
the long term.
"I would also hope that fiscal policy changes will be
consistent with putting U.S. fiscal accounts on a sustainable
trajectory," she said.
(Reporting by Jason Lange and David Lawder; Editing by Andrea