“It is troubling that unemployment rates for these minority groups remain higher than for the nation overall, and that the annual income of the median African-American household is still well below the median income of other USA households”, Ms. Yellen said in remarks prepared ahead of her testimony before the Senate Banking Committee Tuesday.
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The chairwoman of the Federal Reserve has said the USA central bank will proceed cautiously in raising interest rates amid a number of uncertainties facing the United States economy, including Britain’s referendum on Europe.
Federal Reserve chairwoman Janet Yellen warned on Tuesday the U.S. economy faced “considerable uncertainty” from slower domestic activity and from a possible British vote to break with the European Union. Yellen defended Fed projections in helping the market and everyday people understand USA economic conditions. I don’t know where this is going to end.
So she said she is “quite optimistic” about avoiding “the kind of conditions associated with past recessions”.
TOKYO/SINGAPORE Asian stocks edged up on Wednesday as nervous investors counted down to Britain’s make-or-break European Union referendum, while Federal Reserve Chair Janet Yellen’s cautious tone on future rate hikes added to a subdued mood in markets.
“I can’t pre-commit today to telling you precisely what our response will be”, Yellen said. “She is citing the slowing in productivity, the slowing growth of the labor force and a mountain of global uncertainties”.
Nine officials in June expected two rate increases this year, so only three of them would have to lower their forecast for the median to slip to a single move.
Just six days ago, Yellen said a cautious approach to interest-rate hikes “will allow us to verify” that growth, jobs and inflation are improving.
In her opening remarks, Yellen offered no forecast for the timing of future rate hikes in the USA, though fed funds futures, a tool used to predict market expectations of changes in monetary policy, show just a 14% chance of a rate rise next month and a 54% chance for at least one increase by December.
She said in testimony to the Senate Banking Committee that U.S. growth has picked up noticeably in the second quarter from the sluggish pace at the beginning of the year.
Earlier this month the Fed opted not to raise interest rates. Nevertheless, she said economic growth had been uneven and clear downside risks remain a threat. While unemployment has dropped to its lowest since 2007, wages have remained sluggish and inflation below the Fed’s 2 percent target. Another part of their argument was that consumer demand, helped by lower oil prices, would keep supporting growth while exports, business investment and other parts of the economy were uncertain or weak.
During the question-and-answer session, Yellen was asked about the likelihood that the country could be in a recession by the end of the year.
It was an acknowledgment of an argument, made most prominently by Harvard University professor Lawrence Summers, that the USA may be in a state of “secular stagnation” in which the economy grows slowly and interest rates stay exceptionally low.
In her testimony, Yellen called the slowdown likely a “transitory” phenomenon.
But even with a rebound in growth and job creation, Yellen noted other problems.
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Her comments suggest the USA central bank is unlikely to raise rates at its next policy meeting in late July, since it will only have one additional monthly employment report in hand by that time.
