It is too soon to know how President Trump and the GOP Congress’ plans for taxing and spending will influence the economy, Federal Reserve chairwoman Janet Yellen said Tuesday.
“[I]t is too early to know what policy changes will be put in place or how their economic effects will unfold,” the central banker told lawmakers.
She also said that she hoped that any fiscal policies would not add to the debt, citing the need for a “sustainable trajectory” for the federal debt.
Yellen also repeated her warning that the Fed waiting too long to raise its interest rate target would be “unwise,” allowing the possibility of too-high inflation.
Tuesday’s comments were prepared testimony for a statutorily-mandated appearance before the Senate Banking Committee, the first for Yellen of the Trump era.
Trump’s promises to cut taxes, reduce bank regulations, and increase infrastructure spending have helped propel stock markets higher and increased investor expectations that the Fed will move to raise rates more quickly this year in response.
In dialogue with senators, Yellen expanded on the Fed’s view of what’s in store from the unified Republican government.
It appears that there is a greater chance of major economic policy changes, she acknowledged. Yet she said that “we don’t want to base current policy on speculation about what may come down the line. We will wait to gain greater clarity on policy changes.”
Citing reports from the Congressional Budget Office, she added that “we have known for many, many years that the U.S. fiscal trajectory is not sustainable.”
