WASHINGTON, (MILLAT+APP/AFP) – “Surprises” in the
world economy and the still undetermined spending policies of the Donald Trump administration have the potential to impact the course of US interest rate policy, Federal Reserve chief Janet Yellen said Thursday.
Speaking on the eve of Trump’s inauguration, Yellen’s only mention of the future president’s possible policies came in the final paragraph of a 17-page prepared speech, and was similar to her recent past statements.
“I would mention the potential for changes in fiscal policy to affect the economic outlook and the appropriate policy path,” she told the Stanford
Institute for Economic Policy Research in California.
“At this point, however, the size, timing, and composition of such changes remain uncertain.”
This echoed a similar statement in a speech in San Francisco on Wednesday, when she said central bankers would “closely follow” the economic policy changes under consideration in the Trump administration.
Trump has promised massive spending on infrastructure as well as corporate tax cuts and deregulation.
In her latest remarks, Yellen stressed that “monetary policy over the next few years will depend on many different factors, of which fiscal policy is just one.”
In her lengthy explanation of the calculations that go into decisions about the benchmark interest, she also said that “the strength of global growth will also have an important bearing” on the path of interest rates.
She cautioned that “the scope for surprises is considerable,” but she did not provide any details on the global outlook.