Previewing Trump’s Policies, Yellen Sticks To Steady Outlook on Interest Rates
January 20, 2017
Federal Reserve Chair Janet Yellen Sticks to Steady Outlook on Interest Rates; A preview of Trump’s policies on the day of his inauguration; GOP governors defend ObamaCare’s Medicaid Expansion; Treasury Yields Continue Increasing.
- Federal Reserve Chair Janet Yellen Sticks to Steady Outlook on Interest Rates. On Thursday, Federal Reserve Chairwoman Janet Yellen said that she doesn’t expect growth to pick up much soon, suggesting that the central bank is sticking to its plan of raising interest rates cautiously and gradually in the following months. Speaking the day before Trump’s inauguration as the 45th U.S. president at Stanford University, Yellen said the economy remains constrained by multiple long-term forces. “Economic growth more broadly seems unlikely to pick up markedly in the near term given the ongoing restraint from weak foreign demand, rising interest rates, an aging population and other factors,” she said. To keep inflation in control, Yellen said the Fed will likely be “prudent to adjust the stance of monetary policy gradually over time.” Last month, Fed officials raised their benchmark federal-funds rate by a quarter percentage point to a range between 0.50% and 0.75% and planned in three quarter-point increases this year. [WSJ]
- A preview of Trump’s policies on the day of his inauguration. On the day of Donald Trump’s inauguration on Friday as the 45th president, questions remain about his policy plans. He inherits an economy in a much stronger shape than at either of the past two inaugurations. Mr. Trump says he wants to see a 4% growth rate for the economy that has not reached 3% growth in more than a decade. His economic plan combines an aggressive trade stance with promises to cut regulations and decrease tax rates. Regarding health care, Trump promised to replace ObamaCare with his own plan that he said would include “insurance for everybody.” On energy and environmental policy, Trump’s advisers have prepared a list of energy and environmental policy changes that he may take within hours of being sworn in on Friday. These policy changes include steps to limit the role that climate change plays in government decisions. The list of policy changes include nullifying President Obama’s guidelines that federal agencies weigh climate change when approving pipelines, suspending the government’s use of a metric known as the social cost of carbon until it is reviewed and recalculated, and rescinding a 49-year-old executive order that places the State Department in control of permitting border-crossing oil pipelines. Based on his campaign pledges, Trump plans to roll back a host of Obama administration actions on climate, including rescinding the Environmental Protection Agency’s Clean Power Plan greenhouse gas emissions from power plants. [WSJ, Bloomberg, The Hill]
- GOP governors defend ObamaCare’s Medicaid Expansion. Several Republican governors are defending ObamaCare’s Medicaid expansion in their states. A full repeal of the health care law would eliminate the law’s expansion of eligibility for Medicaid coverage, which has provided insurance for about 11 million new people in 31 states. Many of these states are governed by Republicans who do not want their constituents to lose their health care coverage and federal funding for their state Medicaid budgets. Several governors came to Washington on Thursday to meet with Republican lawmakers to discuss how to handle the future of Medicaid. These governors include Michigan Gov. Rick Snyder and Ohio Gov. John Kasich. Trump and his incoming administration say that they are going to propose block grants for Medicaid, giving states a set amount of federal money. [The Hill]
Economic Indicators & News
- Treasury Yields Continue Increasing. Government-bond yields accelerated to their highest level since Jan. 3. The yield on the 10-year Treasury note settled at 2.461% on Thursday after rising as high as 2.494%, up from 2.327% earlier this week. The increase in yields followed Federal Reserve Chairwoman Janet Yellen’s announcement that the central bank expects to raise short-term interest rates several times this year. Bond yields rise when prices fall. While hedge funds have largely been betting that the yield rise will continue, many investment management firms are betting that bond yields will fall due to slowing population and productivity growth and heavy global debt loads. [WSJ]