Yellen To Navigate A Tricky Path In The Coming Year

This week, Federal Reserve Chair Janet Yellen is set to testify before the House Financial Services Committee and the Senate Banking Committee, where she will present the bank's semiannual economic outlook. Yellen may comment on everything from international issues keeping the bank from loosening its policies to the bank's inflation goals, but lawmakers are expected to press her in the final Q&A section of the talks to gain more insight into the bank's future plans.

Inflation

Yellen is expected to face a barrage of questions regarding inflation, as it remains a key measure with which the bank has gauged its policy decisions. While overall inflation has been below the bank's 2 percent target, some question whether the growing price gap between goods and services could make the Fed's predictions inaccurate.

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The cost of services has been on the rise in recent months, while goods continue to decline. For example, the price of a new TV has fallen 58 percent over the past five years, but the cost of cable has risen by about 13.7 percent, reported the Wall Street Journal. For that reason, consumers have been cautious about their spending habits.

International Contagions

The financial chaos in both Greece and China is also likely to come up during Yellen's testimony. While the U.S. economy may be strengthening, the bank will have to consider whether the recent issues in Greece and China will impact U.S. growth and recovery.

With China representing one of the largest economies in the world and the eurozone playing an important role in market stability, the bank will have to be careful to contain any market fallout that comes from problems abroad.

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