Stocks were mostly 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.
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US stocks earlier surged as investors focused on Federal Reserve Chair Yellen’s comments on the economy and signaled more skepticism that Federal Reserve officials will follow through with interest-rate increases. She said solid growth in household spending had led to an expansion of the U.S. economy.
“I believe that our economic conditions are increasingly becoming more favourable for a Fed Fund Rate increase – especially in the past couple of months”, said Yellen during a speech at the Annual Federal Reserve Conference Meeting on Friday, August 26, in Jackson Hole, Wyoming, US.
The stock market’s key averages were mixed at midday Friday after release of the prepared remarks, having recently hit new record highs.
Yellen appeared just before her 10 a.m. EDT speech, flanked by Fischer and New York Fed President William Dudley.
Federal Reserve Vice Chairman Stanley Fischer told reporters on Friday the decision on whether to hike interest rates should be looking forward, not backward – and the next jobs report will figure into the process.
The Fed raised rates in December for the first time in almost a decade and projected another four hikes in 2016, only to scale that back to two moves in the wake of a global growth slowdown, financial market volatility and slow progress in meeting its 2 per cent inflation goal.
Investors now see an 18 per cent probability 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.
Viktor Nossek, director of research at WisdomTree Europe, does not expect a rate rise imminently, despite Yellen’s comments. “Jackson Hole has done nothing to trigger a rate hike in the United States”, he said.
Fed leaders have sometimes used the Jackson Hole event to announce major policy shifts.
Analysts say the timing of the next rate hike is likely to hinge on the strength of new economic data in coming weeks – particularly the job numbers due out in the first week of September and inflation data, which has remained below the Fed’s target range of two percent.
“Most global currencies are down against the USA dollar”, he said. The odds before Yellen spoke stood at 18%.
Thereafter, he added her views “didn’t necessarily offer much in the way of surprises but it did confirm one thing – there is now a clear and public hawkish consensus building within the Fed and Chair Yellen is on board” with regard to guidance on monetary policy.
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The group, some wearing T-shirts bearing the slogan, “We Need a People’s Fed!” posed questions about economic policy and the need for diversity to the Fed officials who took part in the 90-minute discussion.
