Yellen treads lightly as Trump takes power

Yellen treads lightly as Trump takes power
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Federal Reserve Chairwoman Janet Yellen is offering few hints for how she plans to navigate Donald TrumpDonald John TrumpMilitary personnel to handle coronavirus patients at facilities in NYC, New Orleans and Dallas Navy hospital ship USNS Comfort has total of 20 patients: report Fauci says that all states should have stay-at-home orders MORE’s Washington.

Speaking with reporters for the first time since the president-elect’s victory, Yellen repeatedly dodged opportunities to directly spar with Trump on policy or political matters. And those came even as Yellen acknowledged the Fed will have to weigh how this dramatically remade Washington plans to make its mark on the U.S. economy.

Yellen was pressed by reporters repeatedly about how she would coexist with Trump as she fielded questions on everything from his trade policy to his tweets. And repeatedly, Yellen sought to make as minimal a mark as possible, either deferring decisions to a later date or refusing to engage in the first place.


“I’m not going to offer the incoming president advice about how to conduct himself in policy,” she said in response to a question about Trump singling out companies for attack via social media.

Yellen is often loathe to dabble in politics as head of the Fed, which guards its political independence closely. She even went so far as to suggest Fed policymakers were not discussing the most dominant storyline in the world — the presidential election — in the weeks leading up to it.

But now that Trump is preparing to make a major shift in how Washington operates, Yellen is presenting the Fed as one that will roll with the changes as best it can.

“I would simply summarize by saying that all the [Federal Open Market Committee] participants recognize that there is considerable uncertainty about how economic policies may change and what effect they may have on the economy,” she said. “We’re operating under a cloud of uncertainty at the moment.”

Beyond policy matters, the Fed is facing a hugely uncertain future. Trump’s election and GOP retention of power in Congress increases the odds that Republicans will push legislation that could drastically overhaul how the Fed steers the U.S. economy — proposals that have been criticized by the usually stoic Yellen.

Even in terms of her own future, Yellen was evasive. She had previously said she has every intention of serving out her term as Fed chair into the beginning of 2018. She stuck by that stance Wednesday but left the rest up in the air, as Trump has said he would likely replace Yellen at the first available opportunity.

Yellen even left open the option of remaining on the Fed as a member of its board of governors after stepping down as chair, given that her term on the board lasts until 2024.

“I haven’t made any decision about the future,” she said. “I recognize I might or might not be appointed. It’s a decision I don’t have to make and don’t have thoughts on at this time.”

Yellen’s comments came as she discussed the Fed’s decision to raise interest rates for just the second time since the financial crisis, its first policy move since one year ago. Wednesday’s hike was modest in scale — climbing just a quarter of a percentage point to a range of 0.5 to 0.75 percent — but significant in terms of what it represents. Fed officials now believe the central bank could hike rates another three times in 2017 as it ramps up the increases to return to more normal levels since before the financial collapse.

At the same time, Yellen is attempting to navigate a Washington that appears poised for bold policy action, even if the Fed is not encouraging it. Yellen and her predecessor Ben Bernanke had vocally called on Congress to adopt fiscal stimulus in prior years to help along a laggard economic recovery.

But now, with unemployment rate at 4.6 percent, Yellen argued that bold steps — like a massive influx on infrastructure and defense spending advocated by Trump — may no longer be the right prescription.

“I would say at this point that fiscal policy is not obviously needed to provide stimulus to help us to get back to full employment,” she said.

She quickly added, “I’m not trying to provide advice to the new administration or to Congress as to what is the appropriate stance of policy.”

One area where Yellen was more willing to draw a distinction between herself and Trump was on financial regulation and the future of the Dodd-Frank financial reform law. Trump has vowed to dismantle that 2010 law, and top transition officials have indicated it will be a high priority come 2017.

But asked about the law Wednesday, Yellen made a spirited defense. While she agreed some tweaks could be made to reduce the burden on smaller community institutions, she argued Dodd-Frank had made a future financial crisis less likely, and made the overall financial system a much safer place for the U.S. economy.

“This is very important progress that’s very important not to roll back,” she said. “It’s important to keep this in place.”