US Federal Reserve chief Janet Yellen did not say whether rates would be increased in September during her speech to central bankers at Jackson Hole, Wyoming, but said that the conditions for such a hike will be more likely in coming months.
Advertisement
She noted the USA economy continues to expand, “led by solid growth in household spending”.
Spot gold rose 1.3 percent as the USA dollar lost ground despite Yellen’s comments. “Smoothing through the monthly ups and downs, job gains averaged 190,000 per month over the past three months”.
“While economic growth has not been rapid, it has been sufficient to generate further improvement in the labor market”, Ms. Yellen said. “Of course, our decisions always depend on the degree to which incoming data continues to confirm the Committee’s outlook”.
Fed policymakers have been struggling in their attempt to push rock-bottom interest rates closer to normal as the recovery from the Great Recession matures. In the eight months since then, Treasury yields have fallen to record lows, and mortgage rates have tumbled right along with them. The current guide for the Federal funds rate is 0.25 to 0.5 per cent and it is a comment in itself on the mood in world markets that there is now such debate on when the Fed might raise this to the (un) giddy heights 0.5 to 0.75 per cent. Other tools developed by the Fed – including payments it makes to banks on the reserves they deposit with the central bank – could be another long-run feature of Fed policy. Critics worry that the low funds rate – now targeted between 0.25 and 0.5 percent – will prevent the Fed from having latitude should a crisis on the scale of the 2008 one materialize. At the beginning of the year, the Fed projected it would raise rates four times this year. At the moment the markets, on balance, do not expect the Fed to move again until early next year. But since then, global economic pressures, financial market turmoil and a brief slump in the USA job market have kept the Fed on the sidelines.
Yellen added that the Fed continues to believe that future rate increases will remain “gradual”.
Advertisement
Hunter pointed to a government report Friday that the economy, as measured by the gross domestic product, grew at an anemic 1.1 percent annual rate last quarter as evidence that the Fed likely wants to see stronger growth. Growth in the first quarter was just a 0.8% annual rate, the slowest in two years. Wearing green shirts that read “We need a people’s Fed”, activists called on the central bank to hold off raising interest rates and focus instead on driving down unemployment rates for black and Latino Americans.
