Federal Reserve Chairwoman Janet Yellen said Thursday that the Fed is on track to raise interest rates for the first time in nine years. USA stock prices held steady, while the dollar rose 0.6 per cent against a basket of currencies, pressuring gold, which is priced in the USA dollar.
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Many economists believe the Fed’s first rate hike will occur in September, but they see at most only two quarter-point moves this year.
In her semiannual testimony to Congress on Wednesday, Yellen repeated her view that the Fed will likely hike interest rates this year if the USA economy expands as expected, and cited improvement in the labour market.
But Yellen says she considers the recent low readings as transitory, reflecting the fall in the price of oil and imported goods, and she reiterated her expectations that inflation would gradually rise toward the Fed’s target of 2 percent.
Numerous problems that sent the economy into reverse in the January-March quarter appeared to be waning, she said.
However, Ms Yellen said overseas growth could improve quicker than people expect. Like many previous reports, that growth was described as modest or moderate.
“Foreign developments, in particular, pose some risks to United States growth”, she warned.
“The situation in Greece remains hard”, she said.
The senators’ questions for Yellen centered mainly on the Fed’s role as the top banking regulator.
Mr. Hensarling said the Fed had “crossed the line” by failing to comply with a subpoena for documents.
“Some aspects of the Fed’s transparency could be improved”, Mr Shelby said.
A potential USA rate hike has been discussed in financial markets as early as 2013, and gold has already fallen as a effect, said HSBC analyst James Steel.
The relief is likely to be temporary, however.
Consumer spending could take a hit, too, he notes. U.S. producer prices rose a seasonally adjusted 0.4% in June, led by energy.
The USA dollar opened higher against the Taiwan dollar on follow-through buying, but soon dipped into negative territory in the wake of an initial technical rebound staged by the local equity market after the Greek parliament passed a bailout agreement signed with the country’s creditors, dealers said. “Within manufacturing, the weakest part is foreign demand”. The index rose to 3.9 points from a negative 2 in June.
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In Shanghai, shares moved in and out of positive territory, with Wednesday’s gross domestic product report unable to settle investors after a month-long plunge wiped 30 percent off the composite index, amounting to trillions of dollars in valuations.
