It also has a meeting in early November, however, it’s unlikely the Fed would raise rates right before the USA elections.
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She stressed that the Fed’s rate decisions will depend on whether the freshest economic data continue to confirm its outlook.
“While economic growth has not been rapid, it has been sufficient to generate further improvement in the labor market”, Ms. Yellen said.
“Overall, along with the more upbeat tone of the recent data, we think the odds of a September rate hike have probably increased”, said Andrew Hunter, U.S. Economist at Capital Economics.
Yellen’s synopsis of United States economic activity was notably optimistic, despite the fact the services sector posted unimpressive growth in August the day before.
Hunter pointed to a government report Friday that the economy, as measured by the gross domestic product, grew at an anemic 1.1% annual rate last quarter as evidence that the Fed likely wants to see stronger growth.
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. The Fed put interest rates at zero in December 2008.
BOND REACTION: After initially rising after Yellen’s speech, USA government bond prices fell.
And some have said that if the Fed does decide to act in September, it would need to further prepare investors.
“The speech from Janet Yellen. was the biggest thing moving the market today”, said Steve Belisle, a senior portfolio manager of equities at Manulife Asset Management.
The S&P 500 rose after Fed Chair Janet Yellen said the case for raising rates had strengthened but did not indicate when the Fed would act.
US stocks ended modestly lower after a volatile session on Friday, having bounced between gains and losses as investors wrestled with the likely timing of a USA interest rate hike following comments from top Federal Reserve officials. The Fed’s committee next meets in late September.
Ms Yellen delivered the remarks at the Jackson Hole meeting of central bankers in Wyoming on Friday afternoon. Both Yellen and Fischer generally walk the same path.
“Most global currencies are down against the USA dollar”, he said.
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Traders since last week were betting that the Fed will not act at least by its December meeting because of a mixed economic performance, as the economy is creating more jobs than expected but inflation is showing a weak trend.
