Tarullo: Fed to carefully watch market reaction to Trump administration

WASHINGTON: The Federal Reserve will need to watch carefully how markets react to the election of Donald Trump, but does not need to change its policy path until it is clear how the economy responds, Fed Governor Daniel Tarullo said on Tuesday.

The recent rise in bond yields and slight tightening in financial markets represents "some expectation of higher growth, higher spending and higher inflation," Tarullo said at the Wall Street Journal CEO Council event.

"That is maybe an expectation. Now we will want to watch and see how it manifests itself in actual movement and change in fiscal policy."