Janet Yellen
Scott Mlyn | CNBC
The United States isn’t an island. We’re part of the global economy. What happens in the rest of the world — in Europe, in Asia — affects the United States.
Janet Yellen
Former Federal Reserve Chair
Inflation in the U.S. also remains low — too low, according to Yellen.
“The United States isn’t an island,” she added. “We’re part of the global economy. What happens in the rest of the world — in Europe, in Asia — affects the United States. And it’s also true that U.S. monetary policy affects conditions all around the globe.”
Yellen led the Fed for a four-year term that ended February 3, 2018. Under her tenure, the Fed raised rates in December 2015 for the first time in nearly a decade. It was the start of an effort to hike rates back to a point where policymakers could have some leeway to reduce them again in the face of any future downturn.
Wednesday’s expected rate cut is seen as a pre-emptive move amid growing concerns over global growth outlook and the impact of the ongoing trade war between Beijing and Washington.
The central bank has said it’s worried about slowing world growth, the possible impact of trade wars and low inflation. It has also said it would act to extend the economic expansion, if needed.
Yellen explained the country’s focus should be on maintaining the conditions for a strong U.S. economy that can stay on an expansion path.
“I think in light of the risks, I would be inclined to cut a bit,” she said, referring to the Fed’s benchmark interest rate. “I wouldn’t see this as the beginning, unless things change, of a major easing cycle. But I do think it’s appropriate.”
— CNBC’s Patti Domm contributed to this report.
