Yellen: Banking reforms should avert future financial crisis

But Yellen said the system is better able to handle any shocks that might occur if investors began dumping assets out of concerns about a future financial threat.

“I think we have a strong banking sector that’s well capitalized and has a lot of liquidity,” she said.

Yellen said the U.S. unemployment rate, which stands at a 16-year low of 4.3 per cent, is “below the level that most of my colleagues believe is sustainable in the long run.”

Yellen said that most policymakers believe that as unemployment falls, it will begin pushing up wages and that will result in higher levels of inflation. The Fed has hiked its Fed funds rate by a quarter point on three occasions since December, most recently this month, to a range of 1 to 1.25 per cent, partly because of this concern.

Yellen declined to comment on her relationship with President Donald Trump but noted that it has been a long tradition in the United States for the Fed to have a close working relationship with the administration in power. Yellen was responding to a question her relationship with the president, who had attacked her handling of the Fed policies as “shameful” during last year’s campaign.

She said she was continuing that tradition with current Treasury Secretary Steven Mnuchin, with the two conferring often on various issues affecting the economy and financial regulation.

“I would say that I have got a good working relationship,” Yellen said, adding that the administration has respect for the independence of the Fed.

Yellen also conceded that Britain’s upcoming exit from the European Union would likely impact the British economy.

“I believe there are very deep ties between Britain and the European Union, and there will be a desire to make sure that the economic value of that remains to the maximum extent possible,” she said. “I’m sure there will be a period here of uncertainty about how this will unfold that will affect households and business decisions as it unfolds.”

One decision that could be affected, she said, was location.

Many businesses are worried about the possibility of a “hard” Brexit, whereby Britain fails to strike a deal with the remaining 27 nations of the EU before the formal departure date of March 2019. In that case, the country would see tariffs slapped on its exports to the bloc, its biggest trading partner. Many fear that could do untold harm to the British economy. Some businesses, including some from the financial sector, are mulling the possibility of leaving Britain for the EU.

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Crutsinger contributed from Washington.

Pan Pylas And Martin Crutsinger, The Associated Press

by Canadian Press

Yellen: Banking reforms should avert future financial crisis

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