Eastern Time, delivering her semi-annual testimony before the Senate Banking Committee.
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“Proceeding cautiously in raising the federal funds rate will allow us to keep the monetary support to economic growth in place while we assess whether growth is returning to a moderate pace”, she said.
Dollar up against most currencies * Yellen sticks to cautious script, gradual rate hike view * Sterling’s short-covering rally fades By Ian Chua SYDNEY, June 22 (Reuters) – The dollar clung onto modest gains early on Wednesday after Federal Reserve Chair Janet Yellen held the line of “gradual increases” in US rates, while sterling’s short-covering rally lost momentum a day ahead of Britian’s European Union referendum. “She wants to nudge that consensus in the direction of slowing the pace of monetary policy tightening”.
“It seems pretty clear the Fed’s confidence was pretty badly shaken by those recent numbers”, said Ward McCarthy, chief financial economist at Jefferies in NY, who also pegged Yellen as likely favouring one hike this year.
Yellen on Tuesday repeated a message she offered last week that, in the short term, the Fed expects the economy to rebound from a disappointing first quarter, and that she continued to foresee “gradual” rate increases without offering a firm timetable. It fell 0.6 percent against the euro EUR= to $1.1307.
“Yellen has certainly become less optimistic about future economic growth”, said Sung Won Sohn, an economics professor at California State University, Channel Islands.
Opinion polls and betting markets indicate that Britons are more likely to vote to remain in the European Union in a referendum Thursday.
KEEPING SCORE: Britain’s FTSE 100 was up 0.5 percent to 6,259 and Germany’s DAX was 0.7 percent higher at 10,082.
But since December, financial market turbulence at the beginning of the year, a global economic slowdown and a sharp drop in oil prices have kept the Fed on the sidelines.
“Economic growth has been uneven over recent quarters”, she said. Oil prices have tumbled in the last few years because growth in supplies has far outstripped demand. In addition to these problems, Yellen lamented “surprisingly weak” business investment and a slow labor market.
THE QUOTE: “The market seems to have responded well to Dr. Yellen’s tone of caution”, said Phil Orlando, chief equity strategist for Federated Investors.
November, 2016 meeting – Market is pricing 66 percent probability that rates will remain at 0.25-0.5 percent, 31 percent probability that rates will be at 0.5-0.75 percent, and 3 percent probability that the rates will be at 0.75-1 percent. Ms. Yellen said the those effects are very hard to quantify. It said sluggish freight market conditions are hurting rates, as are the costs associated with an increase in pay for drivers.
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“We expect the Fed will be tightening again before long, although given the very cautious tone, tightening as soon as July looks quite unlikely, even if the June employment report is quite strong”, said Jim O’Sullivan, chief U.S. economist at High Frequency Economics. President Bullard instead sees one near-term hike, but no more to end-2018. “We’ll have to watch carefully”. Don’t include URLs to Web sites. But these suggestions should be sent To avoid distracting other readers, we won’t publish comments that suggest a correction.
