The Federal Reserve has a lot of power over the economy. It is obligated to promote maximum employment and guard against inflation. In the near term, long-term interest rates, which presently are very low, could rise after the Fed raises its benchmark rate. Rates have been hovering near zero since 2008. Yellen is cautious, however, not to take the market by surprise with any change in monetary policy.
In a recent interview, Yellen said equity market valuations are high and warns of “potential dangers.” Yellen said that “she sees risks as moderated and does not see any bubbles forming, though the central bank is watching the issue closely.”