Federal Reserve Chairwoman Janet Yellen is not pleased with the highway spending bill moving toward passage in Congress because of the money it would take from the central bank’s capital account. A more stimulative fiscal policy would “enable the Fed on average to have a somewhat higher level of rates and then have more scope to respond to negative shocks”.
Advertisement
“I absolutely wouldn’t see it as anything approaching 65 percent”, the central banker said. Businesses and consumers have been too cautious to borrow.
Low inflation damages the economy in part by making it costlier for borrowers to repay their debts.
The euro jumped by 2 1/2 cents, (http://www.marketwatch.com/story/dollar-moves-up-as-investors-ready-for-ecb-meeting-2015-12-03) briefly hitting its highest level in four weeks. They had expected more. European stocks gave up gains to close sharply lower. “Such an abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession, reported the British newspaper, The Guardian”.
Yellen noted recent strong gains in the labour market, including an October jobs report that showed employers added 271,000 new positions, the most this year, which pushed unemployment to 5%, down from its peak of 10% in October 2009.
Zafgen (ZFGN.O) shares were down 4.4 percent at $6 after the company said the U.S. Food and Drug Administration was putting on complete hold a late-stage study testing its experimental obesity drug.
It is too soon to say this translates to wage growth, but this is definitely a sign that the labor market is getting tighter, which means wages are getting competitive even for positions that require the fewest skills. The Fed’s key rate has been near zero since the 2008 financial crisis. They’ve kept it there ever since. “In that sense, it is a day that I expect we all are looking forward to”. “On the contrary, she spent a lot of time talking about expectations about not just the upcoming meeting but also the path of rate increases in the future”.
The primary goal of the Federal Reserve is to raise or lower the rate in an effort to help the economy grow at a steady pace.
Those drags include slow growth in Europe and Asia, along with a strengthening dollar, which weighs on US exports.
Is the US job market finally healthy enough to lift Americans’ long-stagnant pay?
The outflow is the biggest single-day percentage drop in four years.
“The strong dollar, low commodity prices, and weak global demand were named by several districts as factors for constrained demand”, the report said.
However, it’s a different story in the eurozone as the European Central Bank committed to extending stimulus measures to boost a flagging economy.
In theory, higher US borrowing rates could squeeze economic growth.
Advertisement
At the event, Yellen said that progress has been made towards full employment, while less has been made toward price stability.
