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Fed chief Yellen expects interest rate hike this year
The low unemployment rate “does not fully capture the extent of slack”, she said.
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Speaking in Cleveland, Ohio, Ms Yellen said she expected the economy to grow steadily for the remainder of the year, and that would at least allow the Fed to move ahead with its first rate hike since late-2008.
“We want to see further improvements in the labor market and with inflation running as low as it is, we want to feel reasonably confident that inflation will move up” in the next two to three years, Yellen said in outlining the landscape that will determine the timing of the first rate increase.
On Tuesday, the global Monetary Fund warned the Fed against raising interest rates this year.
©2015 by The Associated Press.
In response to the suffering economy, the Fed has kept rates near zero for nearly seven years, according to Reuters. “She couched her prediction with the usual caveats about economic uncertainty, but it appears as if the drama surrounding Greece and Europe was not weighing significantly on the Fed’s outlook”.
On the other hand, while wage growth, a key sign of the tightness of the labor market, has been weak, she noted “tentative hints of a pickup” that could point to more firm gains in the jobs market.
“A significant number of individuals still are not seeking work because they perceive a lack of good job opportunities”, she said. She was cautiously optimistic about the trajectory of the US economy, largely dismissing the nonexistent growth in the first quarter as temporary, while highlighting the factors that suggest stronger growth is on the way. Investors now believe an initial hike is not likely until next year.
Janet Yellen’s goal is to ensure that there are no more financial crises during her lifetime, the Federal Reserve chairwoman said Friday.
Because there are some factors, which I mentioned earlier, that continue to restrain the economic expansion, I now anticipate that the appropriate pace of normalization will be gradual, and that monetary policy will need to be highly supportive of economic activity for quite some time. Still, it does indicate that the tea leaves in mid-July are pointing to Fed rate hikes beginning as planned later in 2015.
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But she also said the economy faced constraints that could hold it back, from a still underperforming housing market to the unresolved crisis in Greece.