Yellen brushes off Trump's criticisms of Federal Reserve

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WASHINGTON — President Trump escalated his attacks on the Federal Reserve this week over rising interest rates, calling it his "biggest threat," but at least one ex-chairman is confident the criticisms won't have any impact on the central bank.

"I don't believe President Trump's comments will change what the Fed is doing," said Janet Yellen at the Mortgage Bankers Association Annual Convention in Washington this week. "I think it's a nondesirable thing for the president to comment on this. To politicize and undermine confidence in how that plan is working essentially damages its reputation."

While Yellen, who chaired the Fed between 2014 through February of this year, doesn't worry about the Fed being swayed, she is concerned about the economy overheating. After the first full year of 3% GDP growth since 2005, Yellen preached caution.

"I expect these good times to last at least through 2019," she said. "We do have to worry about inflation. Growth needs to slow in order to stop inflationary pressures."

Her concern stems from the precarious position of real estate and the housing inventory deficit. While unemployment rates are down overall, the supply of labor needed to build is restrained.

"The scarcity of labor is holding down housing starts and construction. Wages and opportunity have been disappearing. There's fewer unemployed workers in job economy than any time in U.S. history," Yellen said.

She said that while "this industry was ground zero for the financial crisis," the financial system is safer today, with more and higher quality capital and more stringent requirements in obtaining a loan. If another downturn occurs, she thinks the Fed would be hard-pressed to get involved with mortgage-backed securities.

"There's a plan in place with no intention to sell MBS. I wouldn't say never; if there were a crisis and a significant reason to do it. Eventually the Fed would want to return to an all treasuries portfolio."

Yellen, the first woman to serve as chair of the Fed, ended her interview with advice for women coming up, stating the importance of finding what you love doing and mentorship is key.

"Find someone who cares about your career and gives good advice," she said. "Seek these relationships and as you work up the ranks, mentor people coming behind you."

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Economy Interest rates Mortgage rates MBS Housing inventory Janet Yellen Federal Reserve Mortgage Bankers Association
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