US Federal Reserve Vice Chair Stanley Fischer said there was significant uncertainty about US fiscal policy under US President Donald Trump’s administration, but the Fed would be strict in meeting targets of creating full employment and getting inflation to 2 percent.
Speaking at the Warwick Economics Summit on Saturday, Fischer also said he thought Dodd-Frank financial regulation would not be repealed as a whole and he hoped capital requirements for banks would not be significantly reduced.
“There is quite significant uncertainty about what’s actually going to happen, I don’t think anyone quite knows. It’s a process which involves both the administration and the Congress in deciding fiscal policy,” Fischer said, in response to a question. “At the moment we’re going strictly according to what we see as our responsibility according to the law, which is maintaining full employment and getting inflation to 2 percent.”
He also said he thought Dodd-Frank banking regulation legislation would not be repealed, though there may be some adjustments.
“I don’t think that the Dodd Frank act as a whole is going to be repealed. There may be some adjustments to it,” he said.
“There are many aspects that are extremely important. Significantly reducing the capital requirements would reduce the safety of the system and we certainly hope it’s not going to happen, particularly for the big banks,” Fischer added.
Dodd-Frank financial regulation was passed in 2010 after the financial crisis of 2008 to 2009, and included legislation requiring banks to maintain higher levels of capital.
Fischer also mentioned that adjustments to Dodd-Frank could include being less demanding of community banks.
The comments came the day after the Federal Reserve Board’s top bank regulator, Daniel Tarullo, said he would resign in early April, giving a boost to Trump’s plans to ease reforms put in place after the 2008 to 2009 financial crisis.
Tarullo’s departure will give the White House an opportunity to fill three of the seven seats on the Fed Board in Washington, where there are already two existing vacancies.
Trump last week ordered reviews of major banking rules that were put in place after the 2008 financial crisis, drawing fire from Democrats and sending banking stocks higher on expectations that looser banking regulation is coming.
Fed officials, who raised interest rates by a quarter percentage-point in December last year, have given no indication on the timing of their next hike in response to slow, but continuing improvements in the US economy.
The Federal Open Market Committee meets next on March 14 to 15, when investors see a 28 percent chance policymakers will increase rates, based on prices in federal funds futures contracts.
Fed Chair Janet Yellen is scheduled to testify before US lawmakers tomorrow and Wednesday in Washington where she is expected to keep the Fed’s options open on the timing of the next interest rate hike.
Additional reporting by Bloomberg
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