Fed’s Yellen says economy steady enough for more hikes, bond wind down
The United States is healthy enough to absorb further gradual rate increases and the slow wind down of the massive bond portfolio accumulated by the Federal Reserve during the financial crisis, Fed Chair Janet Yellen said in prepared testimony to be delivered to Congress Wednesday morning. In what may be one of her last appearances on Capitol Hill, Yellen depicted an economy that, while growing slowly, continued to add jobs, benefited from steady household consumption and a recent jump in business investment, and was now being supported as well by stronger economic conditions abroad. The Fed “continues to expect that the evolution of the economy will warrant gradual increases in the federal funds rate over time,” Yellen said, while reductions in the Fed’s more than $4 trillion in securities are likely to begin “this year.”
Janet Yellen Says Low Inflation Still Major Source of Uncertainty
Federal Reserve Chair Janet Yellen said the U.S. economy should continue to expand over the next few years, allowing the central bank to keep raising interest rates, while also stressing the Fed is monitoring too-low inflation. “Considerable uncertainty always attends the economic outlook,” Yellen said Wednesday in remarks prepared for delivery to the U.S House Financial Services Committee. “There is, for example, uncertainty about when — and how much — inflation will respond to tightening resource utilization.” U.S. stocks opened higher while Treasury yields fell with the dollar after her testimony was released. Yellen is scheduled to begin her remarks at 10 a.m., followed by a question-and-answer session with lawmakers. She repeats the performance Thursday before the Senate Banking Committee, wrapping up her final testimony to Congress as Fed chair, unless she is re-nominated by President Donald Trump. Yellen’s current term expires on Feb. 3.
China June new yuan loans rise, but credit growth seen slowing
Chinese lenders extended more credit than expected in June, as home lending stayed buoyant while a clampdown on shadow financing activities forced banks to shift more loans onto their books. Beijing has tightened the screws on financial risks due to an explosive growth in debt but has injected substantial liquidity at times to avoid a crunch and maintain stability. The stronger-than-expected loans suggest authorities are keeping up support for the real economy, even as they tighten regulations to force banks to deleverage, said Nie Wen, an economist at Hwabao Trust in Shanghai. “The shadow banking sector is shrinking but credit for the real economy remains strong,” he said. Chinese banks extended 1.54 trillion yuan ($226.9 billion) in net new yuan loans in June, well above analysts’ expectations of 1.2 trillion yuan, up from 1.11 trillion in May.
Germany tightens rules to shield businesses from foreign takeovers
Germany has approved rules to make it easier to block the sale of strategically important companies to investors from outside the European Union, prompted by concerns about China acquiring German expertise by that route. The new regulations, which come amid fears of rising protectionism hurting world trade, allow the government to block takeovers if there is a risk of important know-how being lost abroad. The rules do not need parliamentary approval. “We remain one of the most open economies in the world, but we also need to take fair competitive conditions into consideration,” Economy Minister Brigitte Zypries said in a statement on Wednesday. “We owe that to our companies. They often compete with countries whose economies are not as open as ours,” she added.