In a speech in China, former Fed Chairman Janet Yellen said China isn’t responsible for the U.S. trade deficit with China. Instead, she pointed to tax cuts and Fed rate hikes as the problems. She also said the rate hikes were partly caused by the tax cuts.
Yellen predicted the U.S. central bank would raise rates three to four more times over the next year “to stabilize the unemployment rate,” which she said has fallen below levels most economists see as sustainable. It was 3.7 percent in October.
“We have a country that was already operating at around full employment before the recent tax cuts took place, and additional spending has spurred expansionary fiscal policy,” Yellen said. “That’s pushed the economy to the point of perhaps overheating.”
“It’s something that — although the Fed was already on the path of rate increases — leads to higher rate increases, more rate increases, than we would otherwise have, to offset that stimulus,” she said.