Federal Reserve Chair Janet Yellen says the Fed is moving toward raising interest rates in light of a solid job market and an improved outlook for the USA economy and inflation.
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The case for a USA interest rate hike has strengthened in recent months, Federal Reserve Chair Janet Yellen said on Friday, Aug. 27, in a speech that left the door open for such a move as early as next month.
But the Fed “continues to anticipate” that gradual increases in the federal funds rate will be appropriate with moderate economic growth, additional strengthening in the labor market and inflation rising to 2 percent over the next few years, Yellen said.
“Yellen said the case for raising rates has strengthened of late but gave no fresh indication about the key question hanging over markets – will the Fed hike in September?”
Speaking at a three-day global gathering of central bankers and academics in Jackson Hole, Wyoming, Yellen said the “U.S. economy was nearing the Federal Reserve’s statutory goals of maximum employment and price stability”.
Her remarks raised the likelihood that the Fed will increase the rate from its current ultra-low 0.25-0.50 per cent level by the end of the year, and as early as its next meeting in September.
The Federal Reserve is getting closer to raising interest rates again, the head of the USA central bank and other policymakers said on Friday in comments that left the door open for a hike as early as next month. Speaking as the market wondered when the Fed will resume a policy tightening that began in December, Yellen issued some cautionary tones, but pointed to more increases on the horizon.
But Yellen is confident about economic growth and inflation reaching the bank’s target rate. According to Federal Funds futures, a popular gauge to monitor rate expectations, investors were now pricing in a 24% probability of the Fed raising rates by September, up from 21% a day before.
“But after digging into the meat of her speech it became clear that she really wasn’t saying anything new”, said Chris Gaffney, president of world markets at EverBank, in a note.
Ms. Yellen indicated that a near-term decision is dependent on upcoming data remaining strong, including next Friday’s U.S.jobs report.
On Friday, the Department of Commerce announced that during the second quarter the economy grew at a rate of 1.1% – up from 0.8% in the first quarter but lower than the expected 1.2%.
Fischer said he agreed with the chairwoman. Belisle said the majority of investors expecting a raise in the rate before the end of the year. In the eight months since then, Treasury yields have fallen to record lows, and mortgage rates have tumbled right along with them.
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The coalition said it wanted the Fed and Congress to consider changes in the makeup of the boards of directors of the 12 regional banks to promote more diversity among a group of officials that is mainly white and male and dominated by bankers.
