Yellen Excerpt: Concerned About The U.S. Debt Situation

     WASHINGTON (MNI)  - The following is a response of Federal Reserve Chairman

Janet Yellen to a question from a reporter at her press conference following

Wednesday's Federal Open Market Committee meeting.

Question:

     To return back to the prospective tax bill questions, in your view at all

is the Republican tax bill an ill-timed fiscal stimulus, and are you concerned

at all it will wind up squandering the tools the congress and fed have when it

comes time to dealing with the recession? 

Yellen:

     So look, I would just say that it is up to the administration and congress

to decide on appropriate fiscal policy, and our job is to maintain our focus on

employment and inflation. 

     We continue to think, as you can see from the projections, that a gradual

path of rate increases remains appropriate, even with most, almost all

participants now factoring in their assessment of the impact of the tax policy. 

     It is projected that the tax cut package will lead to additions to the

national debt and boost by the end of the horizon the debt to GDP ratio. And I

will say, and this is nothing new, it's something I've been saying for a long

time, I am personally concerned about the U.S. debt situation. It's not that the

debt to GDP ratio in the, at the moment, is extraordinarily or worrisomely high.

But it's also not very low. 

     It's projected as the population continues to age and the baby-boomers

retire, that that ratio will continue to rise in a unsustainable fashion. 

     So, the addition to the debt, taking what is already a significant problem

and making it worse, it is of concern to me. And I think it does suggest that in

some future downturn, which could occur just for whatever reason, the amount of

fiscal space that would exist for fiscal policy to play an active role, it will

be limited, may well be limited.

--MNI Washington Bureau; +1 202-371-2121; email: holly.stokes@marketnews.com

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