Janet Yellen faces pressure over timing of interest rates hike
The next season of “Game of Thrones” doesn’t start until April, but if you’re looking for drama now, pay attention to the U.S. economy this week.
Federal Reserve chair Janet Yellen testifies in front of the U.S. Senate on Tuesday and the House on Wednesday. Don’t expect her to get a lot of hugs and high fives.
The stakes are incredibly high as the Fed debates when to raise interest rates off their historic lows near zero. If the Fed times the increase correctly, the U.S. economy will continue to lift off. If the Fed gets the timing wrong, America could end up in another recession.
Keep in mind the Fed hasn’t done a hike since 2006, when everything looked pretty rosy for the economy.
The world is in a very different place now. It’s a lot of pressure on the 12 people who make up the Fed committee that decides when to pull the trigger on a rate hike.
The power struggle is on: By Washington standards, this is akin to a Game of Thrones episode … with more glasses and gray hair.
The normally congenial Fed members are starting to be a lot more vocal about their views.
Dallas Fed President Richard Fisher believes the Fed should act soon to start raising rates. In a speech earlier this month, he said his fellow Fed members are “at risk of monetary Alzheimer’s.”
“As I have repeatedly reminded my [Fed] colleagues, every single time the Fed has waited for full employment to be achieved before starting to withdraw accommodation, it has ended up driving the economy into recession,” Fisher said.
Yellen and other Fed members have stressed that any decision to raise interest rates this year will depend on continued improvement in the U.S. economy, especially unemployment closing in on the long-term goal of 5% or so (it’s currently 5.7%) and inflation nearing 2% (it’s currently a mere 0.8%).
