Federal Reserve Chair Janet Yellen on Friday signaled that the central bank is moving closer to raising its influential interest rate amid sustained improvement in the job market.
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“The market … needed to digest both Yellen and Fischer’s comments and it is reacting in a way that is very consistent with an interest rate move”, said David Schiegoleit, managing director at U.S. Bank Private Client Reserve in Los Angeles.
Still, Yellen declined to hint at whether the Fed might raise rates at its next policy meeting, September 20-21, or at its subsequent meetings in early November and mid-December.
Low rates are a boon for gold, which becomes more competitive against interest-bearing assets.
At the annual gathering of central bankers at Jackson Hole, Wyoming, Ms Yellen said the case for a rate hike had “strengthened”.
Sure to ripple through equities and commodities markets, Yellen’s words returned a measure of clarity on the intentions of USA monetary policymakers, who have been publicly at odds in recent months over the need to raise rates in the near-term.
Prior to Yellen’s comments being released Craig Erlam, analyst at Oanda trading group, indicated investors above all wanted “clarity on the near-term path of interest rates”.
Dr Yellen told a monetary policy conference that the case for a rate increase has strengthened in recent months.
“Additional tools may be needed”.
Thereafter, he added her views “didn?t necessarily offer much in the way of surprises but it did confirm one thing – there is now a clear and public hawkish consensus building within the Fed and Chair Yellen is on board” with regard to guidance on monetary policy. Another possibility is after the Fed meeting in December.
A markedly stronger Euro in September, to the surprise of many forecasters, could mean another lurch lower in the GBP/EUR rate towards €1.15 which has been a major support zone over the past three years.
“It’s clear from the Fed’s actions this year that it is aware of global risks, the impact of its own actions on those risks and any potential blow back to the U.S. economy and of the impact of a rising United States dollar in doing some of its work for it”.
Wall Street closed mixed Friday as investors weighed comments from Fed Chair Janet Yellen on a possible interest rate hike.
“Most global currencies are down against the US dollar”, he said.
The Standard & Poor’s 500 index slipped 3 points, or 0.2 percent, to 2,169.
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Yellen was speaking at a Fed conference where central bankers gathered to hear new ideas on how to stimulate economies even after officials have cut rates to near zero and flooded banks with money.
