Treasury Secretary Janet Yellen said interest rates may have to rise modestly to prevent the US economy from overheating due to higher levels of government spending, without specifying a time frame.
"It may be that interest rates will have to rise somewhat to make sure our economy doesn't overheat," Ms Yellen said in an interview with The Atlantic. "It could cause some very modest increases in interest rates."
Stocks briefly extended their losses on Tuesday and the dollar touched session highs following Ms Yellen’s remarks. The yield on 10-year Treasuries pared declines.
The comments from Ms Yellen, a former chair of the Federal Reserve, come amid a debate on whether President Joe Biden’s proposed and enacted government spending could spur a surge in price pressures. Administration and Fed officials both have consistently dismissed concerns over accelerating inflation. They’ve argued that price gains expected this year will be largely transitory and that the central bank has tools to contain any persistent effects.
The Biden administration has been careful to avoid a pattern of commenting directly on Fed policy in the way that former President Donald Trump did, with Mr Biden even saying last month he hadn’t met with Fed Chair Jerome Powell, out of respect for the central bank’s independence.
Economists who follow the Fed said it wasn’t clear whether Ms Yellen was referring to short-term interest rates controlled by the central bank or longer-term rates determined by how financial markets react to economic conditions.
“It should not come as a shock that the two very large spending bills being contemplated would push longer-term interest rates higher”, either through stronger economic growth or by changing expectations among investors for when the Fed will raise rates, said Michael Gapen, chief US economist at Barclays Plc.
“That’s consistent with what markets would say.”
Mr Gapen said he did not think the comments represented a preference for how the Fed should be managing the impact of government spending.
“Secretary Yellen certainly understands” the Fed’s independence, White House Press Secretary Jen Psaki said at a briefing Tuesday. Ms Psaki also said that Mr Biden agrees with Ms Yellen and that “we also take inflationary risk incredibly seriously".
“I don’t think she was making a statement about monetary policy,” said Roberto Perli, a former Fed economist who is now at Cornerstone Macro LLC.
“I’m inclined to read it in terms of longer-term rates – in which case, it’s a fairly innocuous statement.”
When Fed officials last issued projections in March, they forecast no move in interest rates until at least 2024.
Ms Yellen insisted that the heavy spending Mr Biden is calling for would provide a net benefit to the economy, even if interest rates do go up.
“These are investments our economy needs to be competitive and to be productive and I think our economy will grow faster because of them,” Ms Yellen said.
The Biden administration has proposed additional spending packages totalling about $4 trillion on top of the $1.9tn it pumped into the economy beginning in March to combat the impact of the Covid-19 pandemic.
“This has a demand effect on the economy but really it’s going to have important supply effects on the economy,” Ms Yellen said.
Company%20Profile
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Three trading apps to try
Sharad Nair recommends three investment apps for UAE residents:
- For beginners or people who want to start investing with limited capital, Mr Nair suggests eToro. “The low fees and low minimum balance requirements make the platform more accessible,” he says. “The user interface is straightforward to understand and operate, while its social element may help ease beginners into the idea of investing money by looking to a virtual community.”
- If you’re an experienced investor, and have $10,000 or more to invest, consider Saxo Bank. “Saxo Bank offers a more comprehensive trading platform with advanced features and insight for more experienced users. It offers a more personalised approach to opening and operating an account on their platform,” he says.
- Finally, StashAway could work for those who want a hands-off approach to their investing. “It removes one of the biggest challenges for novice traders: picking the securities in their portfolio,” Mr Nair says. “A goal-based approach or view towards investing can help motivate residents who may usually shy away from investment platforms.”
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
The%20specs
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More on Quran memorisation:
The years Ramadan fell in May
Countries offering golden visas
UK
Innovator Founder Visa is aimed at those who can demonstrate relevant experience in business and sufficient investment funds to set up and scale up a new business in the UK. It offers permanent residence after three years.
Germany
Investing or establishing a business in Germany offers you a residence permit, which eventually leads to citizenship. The investment must meet an economic need and you have to have lived in Germany for five years to become a citizen.
Italy
The scheme is designed for foreign investors committed to making a significant contribution to the economy. Requires a minimum investment of €250,000 which can rise to €2 million.
Switzerland
Residence Programme offers residence to applicants and their families through economic contributions. The applicant must agree to pay an annual lump sum in tax.
Canada
Start-Up Visa Programme allows foreign entrepreneurs the opportunity to create a business in Canada and apply for permanent residence.
'Joker'
Directed by: Todd Phillips
Starring: Joaquin Phoenix
Rating: Five out of five stars
COMPANY PROFILE
Name: Xpanceo
Started: 2018
Founders: Roman Axelrod, Valentyn Volkov
Based: Dubai, UAE
Industry: Smart contact lenses, augmented/virtual reality
Funding: $40 million
Investor: Opportunity Venture (Asia)
The specs: 2017 Ford F-150 Raptor
Price, base / as tested Dh220,000 / Dh320,000
Engine 3.5L V6
Transmission 10-speed automatic
Power 421hp @ 6,000rpm
Torque 678Nm @ 3,750rpm
Fuel economy, combined 14.1L / 100km
RESULT
West Brom 2 Liverpool 2
West Brom: Livermore (79'), Rondón (88' )
Liverpool: Ings (4'), Salah (72')
'Skin'
Dir: Guy Nattiv
Starring: Jamie Bell, Danielle McDonald, Bill Camp, Vera Farmiga
Rating: 3.5/5 stars
The Florida Project
Director: Sean Baker
Starring: Bria Vinaite, Brooklynn Prince, Willem Dafoe
Four stars
Fund-raising tips for start-ups
Develop an innovative business concept
Have the ability to differentiate yourself from competitors
Put in place a business continuity plan after Covid-19
Prepare for the worst-case scenario (further lockdowns, long wait for a vaccine, etc.)
Have enough cash to stay afloat for the next 12 to 18 months
Be creative and innovative to reduce expenses
Be prepared to use Covid-19 as an opportunity for your business
* Tips from Jassim Al Marzooqi and Walid Hanna
'Fantastic Beasts: The Secrets of Dumbledore'
Rating: 3/5
Directed by: David Yates
Starring: Mads Mikkelson, Eddie Redmayne, Ezra Miller, Jude Law
Roll of honour
Who has won what so far in the West Asia Premiership season?
Western Clubs Champions League - Winners: Abu Dhabi Harlequins; Runners up: Bahrain
Dubai Rugby Sevens - Winners: Dubai Exiles; Runners up: Jebel Ali Dragons
West Asia Premiership - Winners: Jebel Ali Dragons; Runners up: Abu Dhabi Harlequins
UAE Premiership Cup - Winners: Abu Dhabi Harlequins; Runners up: Dubai Exiles
West Asia Cup - Winners: Bahrain; Runners up: Dubai Exiles
West Asia Trophy - Winners: Dubai Hurricanes; Runners up: DSC Eagles
Final West Asia Premiership standings - 1. Jebel Ali Dragons; 2. Abu Dhabi Harlequins; 3. Bahrain; 4. Dubai Exiles; 5. Dubai Hurricanes; 6. DSC Eagles; 7. Abu Dhabi Saracens
Fixture (UAE Premiership final) - Friday, April 13, Al Ain – Dubai Exiles v Abu Dhabi Harlequins
UAE currency: the story behind the money in your pockets
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Results for Stage 2
Stage 2 Yas Island to Abu Dhabi, 184 km, Road race
Overall leader: Primoz Roglic SLO (Team Jumbo - Visma)
Stage winners: 1. Fernando Gaviria COL (UAE Team Emirates) 2. Elia Viviani ITA (Deceuninck - Quick-Step) 3. Caleb Ewan AUS (Lotto - Soudal)
