Federal Reserve chairwoman Janet Yellen has opened the door a little wider to a rate hike, after voicing optimism about the USA economy at her eagerly awaited speech at the Jackson Hole summit of central bankers, says an analyst. But she stopped short of offering any timetable.
Advertisement
Addressing an annual conference of central bankers in Jackson Hole, Wyo. on Friday, Yellen described a solid job market and an improved outlook for the economy and inflation. She also described consumer spending as “solid”, but noted that business investment was weak and exports were taking a hit from a strong US dollar.
In her speech, Yellen noted that Fed officials have a wide range of views on where rates will likely be in the coming years.
Get free real-time news alerts from the Across America Patch. Sign up for Jared Serbu’s DoD Reporter’s Notebook email alert!
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.
It also has a meeting in early November, however, it’s unlikely the Fed would raise rates right before the US elections.
The Fed chair, however, added that FOMC decisions would always depend on incoming data and hence its perception of increasing rates could change in the future.
“As ever, the economic outlook is uncertain, and so monetary policy is not on a preset course”, Yellen said.
The Fed raised rates in December but it has held off further increases so far this year due to a global growth slowdown, financial market volatility and generally tepid USA inflation data.
But Yellen is confident about economic growth and inflation reaching the bank’s target rate.
Phil Orlando, a strategist at Federated Investors in NY, said: ‘We continue to believe December was the next logical date for a hike but based on comments from Fed officials lately and the argument from Yellen I guess you can’t take September off the table’.
The Fed lifted rates from record low levels in December 2015 but further moves have been delayed after a bout of financial markets volatility early this year, a first quarter slowdown in the USA and uncertainty surrounding the United Kingdom vote to exit the European Union. The rate had been kept near zero since the depths of the 2008 financial crisis. The last time the Fed raised its rates was nine months ago.
Belisle said he was surprised to see that reaction as there was no dovish surprise from the speech.
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”.
Belisle said the majority of investors expecting a raise in the rate before the end of the year.
“Any potential strength in consumer and jobs data could be very helpful to support equity prices where they are right now”, said Jon Adams, senior investment strategist at BMO Global Asset Management in Chicago.
Advertisement
Yellen, however, was more positive about labor market conditions, economic growth and the general outlook of the economy in her speech Friday.
