Lawmakers grill Yellen on interest rates, regulatory policy

US Federal Reserve chief says it would be ‘unwise’ to hold off on interest rate hike

Janet Yellen: The chair of the US Federal Reserve faced lawmakers on Capitol Hill on Wednesday. Photograph: Bloomberg

Congressional Republicans have criticised Federal Reserve chair Janet Yellen's stewardship of the US economy and urged her to halt work on financial regulation until president Donald Trump names new policymakers to the central bank.

In a tense hearing on Wednesday before the House of Representatives’ financial services committee, Republicans made clear they will keep pressing the Fed to trim its large holdings of bonds and set interest rates based on established mathematical rules.

"We must be vigilant to ensure that our central bankers do not one day become our central planners," said committee chairman Jeb Hensarling, a Texas Republican.

Critics say the Fed’s push to cut and then keep rates near zero and buy huge amounts of bonds and mortgage-backed securities in response to the 2007-2009 financial crisis led to the slowest US economic recovery since the end of the second World War.


Regulatory reforms

Mr Hensarling is planning regulatory reforms that include congressional audits of interest rate policy when the Fed disregards policy rules, a measure Ms Yellen said she opposes as an intrusion on the central bank’s independence.

“It would result in poor economic performance,” Ms Yellen said during the hearing.

Her comments came as US retail sales were shown to have risen more than expected in January and consumer prices recorded their biggest gain in nearly four years, boosting prospects of an interest rate increase from the Federal Reserve next month.

Expectations of a March move have driven an index of global shares to a record high.

Ms Yellen appeared to put a March interest rate hike on the table when she spoke on Tuesday. Testifying before lawmakers on Wednesday, she reiterated that it would be “unwise” for the US central bank to wait too long to raise interest rates.

– (Reuters)