“It does have the potential to have a significant economic effect”, she said. By taking interest rates to near zero, the Fed has robbed retirees and middle class families of billions of dollars in safe, supplemental income.
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The ECB dropped its deposit rate further into negative territory, and ECB President Mario Draghi announced the central bank will extend its quantitative easing (http://blogs.marketwatch.com/thetell/2015/12/03/ecb-live-blog-deposit-rate-cut-draghi-to-deliver-more/) until at least March 2017, rather than ending it in September 2016 as initially planned, among other measures.
“When we have divergent monetary policies globally, it often means that there will be exchange rate movements that accompany that”.
Back in November, in a speech before the House Financial Services Committee, Yellen formalized the possibility of a rate hike in December, telling the Committee that December’s meeting is a “live possibility” for a rate increase. And the longer the Fed waits, the faster it might have to raise rates, which could hurt the economy.
The U.S. economy is “doing well”, she said, adding that a rate increase this month was “a live option”.
Yellen noted that one reason not to delay a rate hike too much longer is to avoid the need for a more abrupt sequence of increases that could be more disruptive to the economy than the gradual rate path policymakers say they prefer.
In response to a question, Yellen rejected a suggestion that the Fed might follow the pattern set under former-Chairman Alan Greenspan. Economists surveyed by Bloomberg and investors in futures markets anticipate the target range for the benchmark federal funds rate to rise by a quarter percentage point.
“It’s very important for me to emphasize that there is no such plan”, Yellen affirmed, “[to conduct affairs in] such a mechanical or calendar-based way.
Asked about the risk to U.S. growth from domestic and worldwide terrorism in a congressional hearing, Yellen said the Fed keeps its eyes on the economic impact.
Ms Yellen reaffirmed her view that the drag on growth and inflation from weakness in the global economy and falling commodity prices would moderate next year.
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In a testimony before the joint economic committee, Yellen said that the US economy will likely be sufficient over the next few years, and that sufficiency will lead to further improvements in the labor market.
