But she stopped short of offering any timetable.
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She said solid growth in household spending had led to an expansion of the U.S. economy.
She also noted that while inflation is still running below the Fed’s 2 percent target, it’s being depressed mainly by temporary factors.
SAN FRANCISCO Wall Street will fixate on a wave of USA economic data next week, crested by payrolls data on Friday that could sway expectations about the timing of future interest rate hikes and spark volatility in record-high stock prices.
A move to hike rates may come at the September policy meeting if the economy was doing well.
“Our decisions always depend on the degree to which incoming data continues to confirm the [Fed’s] outlook”, Dr Yellen said.
“As ever”, she said, “the economic outlook is uncertain, and so monetary policy is not on a preset course”.
While stocks initially rose on Yellen’s remarks, they took a dive after Fed Vice Chair Stanley Fischer suggested that a hike could happen as early as September.
Y, which stand to benefit the most if rates are hiked, were up 0.6 percent and on track for their best one-day percentage gain in three weeks.
The Fed raised rates for the first time in almost a decade last December, from around zero to between 0.25 per cent and 0.5 per cent, but has kept them there ever since. The rate had been kept near zero since the depths of the 2008 financial crisis. Krosby said that she wouldn’t rule out a rate increase in 2016, however.
“Most global currencies are down against the US dollar”, he said. The Fed last raised rates nine months ago, the first time it had done so since the 2008 economic downturn.
Janet Yellen’s highly anticipated speech at Jackson Hole was slightly hawkish in the short term for a potential USA interest rate rise, but remained dovish in the long term outlook for loose monetary policy.
Fischer, speaking in an interview with CNBC at Jackson Hole, said “the evidence is that the economy has strengthened”. “We think the evidence is that the economy has strengthened”.
Fischer said it was still possible that the Fed could raise rates twice before year’s end.
Investors now see an 18 per cent probability that the Fed will raise rates at its September policy meeting and a 53 per cent chance of an increase in December, according to CME Group’s FedWatch tool. The Fed is moving alone to tighten policy, as other central banks are easing. In contrast, sectors likely to be hurt by higher rates, such as utilities and telecoms, fell.
Dr Yellen said instead Fed could opt for included more asset purchases and changing the interest rate the Fed pays to commercial banks with excess reserves on deposit at the central bank.
“Finally, and most ambitiously, as a society we should explore ways to raise productivity growth”, Yellen said. She said efforts need to be made, in particular, to boost the productivity of USA workers.
Anheuser-Busch InBev NV (ABI.BT)(ABI.BT) warned Friday its beer megamerger with SABMiller PLC (SAB.JO) could lead to thousands of job losses (http://www.marketwatch.com/story/ab-inbev-warns-3-to-be-laid-off-in-merger-2016-08-26) in the coming years.
Yellen was the lead-off speaker Friday for the annual conference sponsored by the Federal Reserve Bank of Kansas City.
The words by Yellen at Jackson Hole has once again made the NFP report the biggest indicator for the market could decide the future of the September rate hike.
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A low neutral rate constrains how high the Fed can lift rates without harming the economy and thus gives it less room to cut them in a downturn. “If we have a lousy number, sure, you would take the Fed off the table”.
