Ahead of the Republicans taking control of the White House and both houses of the legislature, Federal Reserve Chair Janet Yellen goes to Congress for the first time on Tuesday, citing an unclear detail over the U.S. economic policy than at any time of her three-year tenure.
There is no clarity on President Donald Trump’s economic policies despite announcing a rollback on financial regulation, but the size, scope and timing of the tax cuts remained unclear.
Given a potential new tax on imports and increased infrastructure spending, it could give inflation a boost and send the dollar higher, marking uncertainties that make it unusually for the policy maker to chart a course for decisions on the rates.
"There is quite significant uncertainty about what's actually going to happen, I don't think anyone quite knows," Fed Vice Chair Stanley Fischer said on Saturday.
Meanwhile, the Federal Reserve’s ability to overview shiftings in the economy turned out to be limited despite the best of times.
In 2012, the policy maker said it would start raising rates in 2014, but their first rate hike has been extended until December 2015. Additionally, the anticipated four interest rate increase in 2016 turned out to be one.
There were only minimal changes in the central bank’s Feb. 1 policy statement, which suggests how Fed officials have little insights into Trump’s policies.
"There are just a lot of ways this could go wrong, like spinning off toward a trade war," economics professor and former special adviser Jon Faust said.
Subsequently, the trade policies of China and Germany were criticized by some Trump advisers, including National Trade Council Director Peter Navarro, which placed Washington in a potential global commerce disruption.
At the same time, the new president’s Treasury Secretary Steve Mnuchin said that Washington will be participating in the global economic forums.
Federal Reserve Executives Delivers Outlook
The Federal Reserve Bank remained positive to how Donald Trump’s presidency will influence the economy of the nation, but early signs are likely, according to senior branch executive on Monday.
Senior Branch executive of the Little Rock region of the St. Louis Federal Reserve Bank Robert Hopkins is making his hopes up that Arkansas will be showered with benefits once the president introduces economic policies.
"As we go forward, what happens at the national economy over time can spill over into smaller state economies," Hopkins said.
"My thought would be, let's wait and see what happens with Congress and the administration's desire to introduce a new policy that will spur economic growth, and then hopefully that would spill over into the state of Arkansas, as well."
Analysts have estimated the American economy to be a “full employment,” in which the inflation rose 1.6 percent, while the economy grew 1.6 percent last year.
Hearing this, there could have been three times raise in interest rates with a 25 basis points based on the Fed’s economic estimate for this year.
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