Fed Anticipates Moderate Economic Expansion, Gradual Rate Increases

The U.S. economy will likely continue to see moderate expansion, a strengthening job market and inflation gradually rising to 2 percent in the months ahead, Federal Reserve Chair Janet Yellen said today in her semi-annual report to Congress on the state of monetary policy. She added that the Federal Open Market Committee expects additional gradual increases in interest rates, cautioning that “waiting too long to remove accommodation would be unwise” and could lead to market disruption.

Yellen cited a lower unemployment rate and increased consumer spending, GDP and personal consumption expenditures as signs of a strengthening economy, but noted that “considerable uncertainty attends the economic outlook. Among the sources of uncertainty are possible changes in U.S. fiscal and other policies, the future path of productivity growth, and developments abroad.”

In a question and answer session following her testimony, Yellen highlighted an increase in bank lending, both overall and specifically to small businesses, with greater numbers of consumers reporting that they were successful in securing financing. U.S. banks are also continuing to gain strength relative to their international competitors, she added.

Yellen also expressed support for the “core principles” for financial system regulation outlined in President Trump’s recent executive order, and pledged to work constructively with newly confirmed Treasury Secretary Steven Mnuchin and others members of the Financial Stability Oversight Council to conduct a review of current regulations to ensure that they are effective and appropriately tailored.

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