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Trump presidency increases uncertainty in US interest rate

Reporter: Daniel Ryntjes 丨 CCTV.com

11-21-2016 11:39 BJT

The head of the U.S. central bank has hinted at a possible interest rate hike next month. Federal Reserve Chair Janet Yellen says it could "become appropriate relatively soon." But she admits her job has been made that much more complicated by the election of Donald Trump. Our Washington correspondent Daniel Ryntjes reports.

Through the turmoil and division of Clinton vs Trump election, one thing has remained steady all along: an improving economy. And so Janet Yellen is telling Congress that she is readying the long-anticipated plan to gradually tighten the supply of money.

"My own judgment is looking at incoming economic data and developments thus far affecting the outlook, that the evidence we've seen since we met in November is consistent with our expectation of strengthening growth and improving labor market and inflation moving up. So we indicated that the case had strengthened for an increase in the federal funds rate and to my mind the evidence we've seen since that time remains consistent with the judgment the committee reached in November."

Raising rates impacts emerging markets by making dollar borrowing more expensive. But a stronger dollar can also be beneficial for some exporting nations because their products can become more competitive.

But Janet Yellen admits that the election has thrown up new uncertainties about what impact they will have on America's economic engine.

Donald Trump has risen on a wave of populism fueled by his calls to "drain the swamp" and upend conventional political structures.

The Fed Chair is warning that central bankers around the world should be excluded from such impulses.

She said, "There is clear evidence of better outcomes in countries where central banks can take the long view and are not subject to short-term political pressures. Sometimes central banks need to do things that are not immediately popular for the health of the economy. And we've really seen terrible economic outcomes in countries where central banks have been subject to political pressure."

Donald Trump has promised to lower taxes, spend on infrastructure, revive traditional industries and tear up trade deals. Such policies could lead to higher prices domestically and prompt the Fed to raise rates at a faster pace, in order to keep inflation in check.

"But as Team Obama begins handing over to the still-nascent Team Trump, Janet Yellen says it's still too early to draw conclusions about how this might impact monetary policy heading into 2017," Daniel Ryntjes said.

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