LIVE: Janet Yellen speaks on the Fed’s rate hike

The Fed has not factored in the impact of potential fiscal-policy changes, Yellen said.

Higher infrastructure spending and tax cuts could stimulate the economy and inflation faster than the Fed currently anticipates. Measures of business and consumer confidence have surged since the election, reflecting these expectations.

“It’s uncertain just how much sentiment impacts spending decisions, and I won’t say at this point that I’ve seen hard evidence of any changes in spending decisions based on expectations about the future,” Yellen said.

“We have plenty of time to see what happens,” she said, adding that the Fed was not speculating on what President Donald Trump’s administration would do. Yellen said she had a brief introductory meeting with Trump, and had met a couple of times with Treasury Secretary Steven Mnuchin.

As the Fed continues to normalize rates, questions are arising about how it plans to shrink the balance sheet it expanded after the financial crisis. Yellen said the fed funds rate remained the preferred policy tool, and the Fed has not made a decision on its reinvestment policy.

She addressed the quick surge in market expectations for a rate hike in March, saying that the market’s dovishness was likely influenced by the fact that the first two hikes were a year apart.