“I anticipate continued economic growth at a moderate pace”, Yellen said, “that will be sufficient to generate additional increases in employment, further reductions in the remaining margins of labor market slack, and a rise in inflation to our 2 percent objective”.
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Wage growth has remained perhaps the job market’s biggest weakness since the Great Recession ended 6 1/2 years ago.
A 2016 reversal would also add the Fed to the list of advanced nation central banks which raised interest rates in recent years only to quickly turn tail.
“I think you’ve got an equity market that’s trying to recalibrate to… currencies and bonds that are moving more than they usually do”, said Art Hogan, chief market strategist at Wunderlich Securities.
It has been, moreover, a “recovery” based nearly entirely on financial parasitism and speculation, at the expense of society’s infrastructure.
The economy expanded at a modest 2.1 percent annual rate in the July-September quarter.
“With the federal funds rate near zero, we can respond more readily to upside surprises to inflation, economic growth and employment than to downside shocks”, she said.
Yellen does emphasize that the committee will move slowly when raising interest rates.
In a testimony before Congress Thursday, Fed Chair Janet Yellen reiterated confidence in the US economic outlook.
But Yellen said Fed policymakers can’t wait too long because there are “well-documented lags in the effect of monetary policy” on the broader economy.
The unemployment rate, which is calculated from a different survey, was unchanged at 5%, the Labor Department said Friday.
She and other Fed officials have hammered home the message of late that even after they raise rates for the first time, they will proceed to the next rate increases slowly and gradually. Most economists have forecast that it will grow at a still relatively subpar 2.5 per cent this year, only slightly above its average pace since the recession officially ended in mid-2009.
Last month, when the pressure for a rate increase began to intensify, she noted that wage growth had been flat, despite the news that unemployment decreased to 5 percent, (another indicator for change), yet she also signalled on Thursday that she was disappointed with the decrease in labor participation across the country and the slow crawl towards wage growth, which hit 0.4 percent for October.
Europe is even more depressed than the US. The dollar has already climbed 11 percent against the euro this year.
On Thursday, the ECB announced a further cut in its deposit rate-the interest it charges to banks that deposit money with it-from minus 0.20 percent to minus 0.30 percent.
Notably, the labour-force participation rate, or the share of American civilians over the age of 16 who are either working or looking for a job, has dropped pretty dramatically, with an acceleration in that drop following the 2008 financial crisis and the Great Recession.
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USA stock index futures dipped in pre-market trade after ECB President Mario Draghi said the central bank would extended its asset purchase program to at least March 2017 but did not increase the amount, falling short of expectations.
