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Yellen: Too early to say what effect Donald Trump's election will have on U.S. economy

Janet Yellen said in her testimony that the Federal Reserve remains likely to raise its benchmark interest rate next month.

Associated Press

Janet Yellen said in her testimony that the Federal Reserve remains likely to raise its benchmark interest rate next month.

Janet Yellen, the Federal Reserve chair, said Thursday that it was too soon to predict the likely economic impact of Donald Trump's election as the next president of the United States.

Markets have rallied on optimism that Trump, in concert with congressional Republicans, would cut taxes and increase federal spending on road-building and the military, measures that might stimulate economic growth.

Yellen, who has repeatedly called for Congress to join the Fed in its efforts to lift the economy from prolonged doldrums, suggested celebrations were premature.

"We don't know what's going to happen," Yellen said in testimony before the Joint Economic Committee of Congress, her first public comments since the election. "There's a great deal of uncertainty."

She added, "We will be watching the decisions that Congress makes and updating our economic outlook as the policy outlook becomes clearer."

Trump's election has not altered the Fed's short-term plans. Yellen made clear in her testimony that the central bank remains likely to raise its benchmark interest rate at its next meeting, which is in mid December.

"The evidence we've seen since we met in November is consistent with our expectation of strengthening growth and an improving labor market," Yellen said. "I do think the economy is making very good progress toward our goals."

A rate increase, she said, "could well become appropriate relatively soon."

Yellen also set to rest questions about her own plans. Her term as chairwoman ends in February 2018.

"It is fully my intention to serve out my term," she said.

The Fed has prepared markets in recent months for the likelihood of an increase in its benchmark interest rate in December.

"Chair Yellen struck a reasonably — but still somewhat subdued — positive tone on the economy, and her words will be seen as signaling a high likelihood that the FOMC will be tightening policy at next month's meeting," wrote Jim O'Sullivan, chief U.S. economist at High Frequency Economics, referring to the policymaking Federal Open Markets Committee.

The Fed's economic outlook has brightened in recent months.

"U.S. economic growth appears to have picked up from its subdued pace earlier this year," Yellen said, adding that job growth had also continued.

Yellen: Too early to say what effect Donald Trump's election will have on U.S. economy 11/17/16 [Last modified: Thursday, November 17, 2016 5:48pm]
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