Yellen eases economic concerns but draws ire over Fed's bank policy

Business

Yellen eases economic concerns but draws ire over Fed’s bank policy

U.S. stocks were higher on Wednesday afternoon after three straight sessions of losses as comments by Federal Reserve Chair Janet Yellen eased investor concerns about the U.S. economy’s ability to absorb a gradual rise in interest rates. Yellen acknowledged that tightening financial conditions and uncertainty about China posed risks to the U.S. economy but told Congress she does not expect the central bank to reverse the rate hike program it began in December.

She emphasized a steady-as-she-goes account of Fed policy, with good reason to believe the economy will continue to grow and allow the Fed to pursue its plan of gradual rate hikes. However, interest payments that Yellen calls “critical” to the U.S. central bank’s conduct of monetary policy came under fire from lawmakers, raising questions about new potential political hurdles ahead for the Fed. In a rare display of bipartisanship, lawmakers’ concerns about the payments to banks follow criticism of the Fed by presidential candidates. When policymakers raised borrowing costs in December for the first time since the crisis, they did so in part by increasing the rate of interest paid to banks.