While she now favours higher rates, she said her view could be shifted by economic data in advance of next month’s policy gathering.
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Following the comments, traders increased their expectations of a hike in September to 24 percent from 21 percent, while pricing in a roughly 57 percent chance of a December hike, up from 50.6 percent on Wednesday, according to CME Group’s FedWatch program. 26, 2016, Yellen will deliver a high-profile speech at the annual meeting of the world’s central bankers in Jackson Hole, Wyo.
Risk markets were wary of the USA central bank hinting at near-term interest rate hike which could divert some of the massive liquidity that has drenched global markets.
Stocks little changed; investors eye Yellen speech.
George said Thursday that if the outlook for the economy unfolds as she expects, she would vote for a rate hike at the Fed’s next policy meeting, September 20-21.
On Thursday, several policymakers, including San Francisco Fed President John Williams and Kansas City Fed President Esther George, defended the need to raise rates, albeit gradually, to keep the US economy from overheating.
“As I look at the data and the economy and the progress that has been made, I judge that we are nearing full employment”, George said in an interview on Fox Business Network.
The benchmark index declined 0.7 percent in the previous session following hawkish comments from two more Federal Reserve officials.
Her recent public appearances underscore a determination to offer reassurances that the US economy remains on track, while preserving the Fed’s ability to correct course if the recovery bogs down.
Policymakers expect three rate increases in 2017, in addition to two hikes this year.
Donald Kohn, who was Fed vice chair until 2010, said that on leaving office he had expected to see a quicker recovery from the Great Recession of 2008-2009 but had been surprised by longer-term trends in productivity, demand and interest rates.
More likely is that Yellen offers fairly general insights into her thinking on long-term concerns, including how to restore central banks’ firepower to respond to future economic downturns.
Healthcare stocks, down 0.8 percent, were under pressure for a second straight day.
“Our expectation is that a hawkish message from Fed Chair Yellen this week will pave the way for a September hike, which should help the US dollar recover some ground”, said Daniel Katzive, head of North America FX strategy at BNP Paribas in NY.
German 10-year Bund yields, which followed U.S. Treasury yields higher on Thursday after strong U.S. durable goods data, were marginally higher on Friday at minus 0.07 percent.
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Energy prices were somewhat volatile after Saudi Arabia’s oil minister Khalid al-Falih told Reuters he didn’t believe it was necessary to make any “significant intervention” in oil markets at this time, lowering expectations slightly for next month’s OPEC meeting in Algiers. However, the low volume kept a lid on any strong rallies.
