Federal Reserve Chairman Janet Yellen will address the House Financial Services Committee tomorrow
The details of President Donald Trump's economic policies remain largely unknown.
He has announced a rollback of financial regulation with few details and there is no clarity on the size, scope and timing of the tax cuts he has promised.
Possible new taxes on imports and increased infrastructure spending could boost inflation and send the dollar soaring, uncertainties that make it unusually difficult for the Fed to chart a course for interest rate policy.
There is quite significant uncertainty about what's actually going to happen
Stanley Fischer, Fed Vice Chairman
"There is quite significant uncertainty about what's actually going to happen, I don't think anyone quite knows," Fed Vice Chairman Stanley Fischer said on Saturday.
Even at the best of times, the Fed's ability to see shifts in the economy is limited.
In 2012 it said that interest rates would start to rise in 2014 but policymakers waited until December 2015 for their first rate hike.
Details of President Donald Trump's economic policies remain largely unknown
A forecast of four interest rate rises in 2016 turned out to be one.
Yellen is due to give semi-annual testimony before the Senate Banking Committee on Tuesday at 10am EST. She will address the House Financial Services Committee tomorrow.
The American economy is now, by many estimates, around what the Fed considers to be "full employment," inflation has ticked up to 1.6 percent and the economy grew 1.6 percent last year.
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Yellen is due to give semi-annual testimony before the Senate Banking Committee on Tuesday
Based on the Fed's economic projections for this year, it could raise interest rates three times in 25 basis-point steps.
Little was changed in the central bank's Feb. 1 policy statement, a reflection of how little insight Fed officials have into Trump's policies.
"There are just a lot of ways this could go wrong, like spinning off toward a trade war," said Jon Faust, a Johns Hopkins University economics professor and former special adviser to the Fed's Board of Governors.
Being President Trump: Key Moments Fri, February 3, 2017
Inside Donald Trump's first week in the White House.
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Trump signs an order to review the Dodd-Frank Wall Street to roll back financial regulations of the Obama era.
Among others, Peter Navarro has criticised the trade policies of China and Germany
Some Trump advisers, including National Trade Council Director Peter Navarro, have criticised the trade policies of China and Germany, fuelling concerns Washington might disrupt global commerce.
At the same time, the new president's Treasury Secretary, Steve Mnuchin, has stressed Washington will continue to participate in global economic forums.
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