The US Federal Reserve has agreed an interest rate hike as expected and suggested that more increases could follow in 2017 if the American economy gets a dose of financial stimulus.
Fed chairman Janet Yellen suggested that the quarter point rate hike in the benchmark rate to 0.50%-0.75%, which followed a similar increase at the end of 2015, reflected the fact that “growth is a touch stronger, unemployment is a touch lower.”
“Our decision to raise rates should certainly be understood as a reflection of the confidence we have in the progress the economy has made and our judgment that that progress will continue,” added Yellen. “It is a vote of confidence in the economy.”
However she also added that the Fed was operating under “a cloud of uncertainty” ahead of US president-elect Donald Trump’s taking office next month.
Asked about Trump’s pledge to roll back Dodd-Frank legislation, Yellen said that the regulation had been introduced to avoid a further “devastating financial crisis”.
“I would say it’s very important not to roll back,” she added. “There maybe some changes that could be made and we’ve suggested a few, like eliminating the burden of compliance with the Volcker rule or incentive compensation regulations for smaller banks or modestly raising the threshold for banks that are subject to enhanced credential supervision. But I would urge that it’s important to keep this in place.”
However, Yellen held back from commenting on Trump’s plans once he is inside the White House, nor the criticisms he levelled both at her and the Fed during the election campaign. “I’m not going to offer the incoming president advice about how to conduct himself. I’m a strong believer in the independence of the Fed,” she stressed.
Yellen’s comments, which indicated that the Fed could follow the latest rate rise with three further increases during 2017, pushed the US dollar higher.
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