On Tuesday, U.S. Treasury Secretary Janet Yellen warned that raising interest rates could be needed to keep the U.S. economy afloat, a remark that has further boosted sales in technology stocks.
The former Federal Reserve chairman made the remarks in the context of the Biden administration’s 4 4tn plan. Infrastructure And Welfare expenses, The reason for the top of various rounds of economic stimulus Extreme.
“It may be that the extra money spent is relatively small, but we need to raise interest rates a bit to make sure our economy doesn’t overheat,” he said at an event hosted by Atlantic Magazine. “.
“So it could raise interest rates somewhat modestly for reconstruction. But these are investments to make our economy competitive and productive
Investors and economists are debating whether the trillion-dollar additional federal spending, combined with the rapid vaccination rollout, will cause a shock. Inflation. The controversy came as motivational checks to consumers contributed to the market rally that lifted equities to record levels.
Fed Chairman Jay Powell said he believes inflation will only be “transient”; The central bank has pledged to remain steadfast in a super-relaxed monetary policy until significant progress is made in economic recovery.
The prospect of interest rate hikes since Joe Biden’s U.S. presidential victory has been seen by many investors as risky, even as markets continue to thrive.
Yellen’s comments put additional pressure on shares of high-growth firms, whose futures earnings appear to be relatively undervalued and which had already declined sharply early in Tuesday’s trading session. The tech-heavy Nasdaq Composite fell 2.7 percent in New York at noon, while the SS&P 500 benchmark fell 1.4 percent.
Market interest rates, which changed little after the comments, yielded 1.59 percent from the 10-year Treasury. Yellen recently stressed that U.S. stimulus bills and more broad-based government investment plans in the economy are less likely to lead to unhealthy jumps in inflation. The US Treasury Secretary also expressed confidence that if inflation continued to rise more steadily than expected, the Federal Reserve had “tools” to deal with it.
Treasury secretaries generally do not comment on specific monetary policy actions, which is the scope of the Fed. The Fed chair generally refrains from commenting on U.S. policy towards the dollar, which is considered a priority by the Treasury Secretary.
Yellen’s remarks at the Atlantic event were taped Monday – and he used the opportunity to create the opportunity that Biden’s spending plans would address structural deficits that have long plagued the U.S. economy.
Biden plans to invest more in infrastructure, childcare costs, production subsidies and green energy to address issues ranging from climate change to income and racial inequality.
“We have come a long way in encouraging long-term problems in our economy,” he said.