WASHINGTON (Reuters) – The MPC expected not cut interest rates soon, says the president of the Federal Reserve, Janet Yellen, noting that he expects the factors containing inflation are transitory.
“I do not expect the FOMC will soon be in a situation where a rate cut is necessary,” Yellen said Wednesday during his appearance before the committee of the House of Representatives.
The official stressed that the possibility to bring interest rates into negative territory is something the company should study more, but he does not think there is anything that prevents him from doing so.
“I’m not aware that there is anything to prevent us, but I say that we have not thoroughly researched legal issues, that is something that should be done,” he said Yellen, who also explained that turbulence global markets is something that should be followed closely.
In the testimony prepared for his appearance, he said that the falling markets, China and the revaluation of credit risks could derail the US economy, which otherwise moves on a solid path.
While acknowledging that there were good reasons to believe that America will stay on the path of moderate growth that will allow the Central Bank to apply “gradual” monetary policy adjustments.
The income and household wealth are increasing, domestic spending, “he continued advancing” and business investment outside the oil sector accelerated in the second half of the year, said Yellen.
He said he hopes that the labor market continues to improve and inflation eventually progress to meet the target of the Central Bank, despite the recent fall in expectations of price increases mentioned by some policymakers is particularly disturbing.
Risk Enterprise
The financial sector in the United States “has been resistant” to pressure oil and the weakening of corporate debt markets the world where the largest banks have limited exposure; however, if industry conditions worsen further tensions could arise.
US companies tambiénhan seen their financial conditions harden because of the widespread perception of a global slowdown and uncertainty about the severity of the problems in China.
“These events, if they are persistent, could weigh on the outlook for economic activity and the labor market” in the United States, the official said.
Perceptions could weigh EU
He also noted that some negative events in the global economy has worsened as the weak growth of major manufacturing sectors, such as China and an excess supply of raw materials, which has collapsed oil prices and metals.
While the uncertainty caused by changes in China’s exchange rate policy and the outlook for the economy could particularly affect other dependent nations of raw materials and exports to China.
“If any of these downside risks materialize it, the activity abroad and the demand for US exports could weaken, and financial markets may have further complications,” he said.
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