FRB Chair Yellen today testified before the House FinServ Committee for part one of the semi-annual Humphry-Hawkins hearings, taking even heavier fire than usual from Republicans unhappy with the course of U.S. monetary policy, the way the Fed conducts itself, and the post-crisis rulebook. The chair provided an optimistic if not necessarily certain outlook for the U.S. economy. While Chair Yellen provided an overview of FRB predictions suggesting continued low unemployment and inflation in line with FRB goals, she said that there are equal odds that the economy will be better or worse than the FRB predicts. FinServ Republicans set their sights on two particular topics of interest: the payment of IOER and the size of the Fed’s balance sheet. Both full committee Chairman Hensarling (R-TX) and Monetary Policy and Trade Subcommittee Chairman Andy Barr (R-KY) used their opening statements to lambast IOER, arguing that it allocates credit and pays a premium over market rates which discourages lending to the real economy. Democrats countered that fiscal policy is the main factor holding back economic growth, with many asking the Chair for fiscal policy prescriptions Congress could implement to boost growth, particularly with regard to wages.
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