Stanley Fischer, the Fed’s vice chairman and a close Yellen ally, said after her speech that in deciding whether to raise rates as soon as September, policymakers will assess the August jobs report next Friday to see whether employment growth maintains its solid pace of the past three months.
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Some have said that if the Fed does decide to act in September, it would need to further prepare investors.
Yellen lifted the cloud of uncertainty over the Fed’s monetary policy direction in a speech at a central banking symposium in Jackson Hole, Wyoming, saying: “The case for an increase in the federal funds rate has strengthened in recent months”.
But the Fed chief said the USA economy was creating a lot of new jobs and would likely keep growing moderately, despite data earlier in the day showing only sluggish growth in the second quarter.
NEW YORK (AP) – Stocks were lower on Wall Street in afternoon trading on Friday, giving up modest gains following a generally upbeat assessment of the economy from Fed Chair Janet Yellen.
The Fed raised rates in December, its first hike in almost a decade, but it has held off further increases so far this year due to a global growth slowdown, financial market volatility and generally tepid USA inflation data.
Yellen did not give guidance on what the central bank needs to see before raising rates.
“Yellen wants to set the table for a September hike, but perhaps only deliver the hike in November or December”, said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management, in Menomonee Falls, Wisconsin.
But after sharp swings, the U.S. dollar was flat against the euro at $1.1286 and slightly lower against the yen at 100.28 yen.
The STOXX Europe 600 Basic Resources index rose 2.4 percent, making it the biggest sectoral gainer, helped by a rally in metal prices after two days of losses.
Market watchers had complained this year that the Fed’s public pronouncements had been inscrutable and sometimes contradictory, leaving investors perplexed.
“As ever”, she said, “the economic outlook is uncertain, and so monetary policy is not on a preset course”. Following her remarks, investors continued to bet there were roughly even odds of an increase at the Fed’s December policy meeting. That’s because the economy is expected to remain in slow growth mode with low inflation.
“Interest rate policy is by far the most flexible, the least intrusive to markets, and has proven capable of targeting low inflation”, he said in a presentation after Yellen spoke.
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“It was completely in line with most expectations”, Drilling said in an interview.
