Federal Chairwoman Janet Yellen also commented on President-elect Trump’s plans to stimulate the economywith government spending, which swayed the central bank’s expectations for three hikes next year to head off a potentially overheating economy.
“If there is a large fiscal stimulus then this will almost certainly create inflationary pressure that the Fed will have to fight by raising rates. It’s far from clear how big any stimulus will be and what impact it will have. The Fed is as much in the dark about this as the rest of us,” Luke Bartholomew, investment manager at Aberdeen Asset Management, told CNBC.
U.S. markets have been strengthening ever since Trump’s election win on hopes that the new administration could stimulate the economy with corporate tax cuts and huge infrastructure spending while cutting down on regulation.
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