Yellen’s remarks were interpreted by the market as slightly hawkish, given her mention of the potential for a near-term rate increase in coming months.
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A move to hike rates may come at the September policy meeting if the economy was doing well.
The case for raising USA interest rates has strengthened in recent months because of improvements in the labour market and expectations for moderate economic growth, Fed Chair Janet Yellen said on Friday.
Fed policymakers have been struggling in their attempt to push rock-bottom interest rates closer to normal as the recovery from the Great Recession matures. However, her reiteration that the outlook is data dependent and the fact that she didn’t strongly advocate for a September hike left the OIS market continuing to price relatively low chances of such a move.
The Dow Jones slipped by 53.01 points, or 0.3 percent to conclude trading at 18,396.4 points, while the S&P 500 similarly slipped by 3.43 points or 0.2 percent to end trading at 2,169.04 points.
Federal Reserve: In Jackson Hole, Wyoming, Yellen told a conference of central bankers that the US economy might be strong enough for an interest rate hike.
Fed Chairwoman Janet Yellen didn’t even mention the idea in a discussion of the Fed’s options for the economy should recession hit the US, and other officials speaking on the sidelines of the Fed’s annual retreat here over the weekend made clear it is an approach they would like to avoid.
Speaking at the Fed’s annual Jackson Hole, Wyo., gathering, Fed chair Janet Yellen made clear she’s now in the bulls’ camp when it comes to the economy. The Nasdaq composite rose 6.71 points, or 0.1 percent, to 5,218.92.
A government report released today showed that the US economy has expanded slower than previously estimated in the second quarter, as businesses are running down their inventories faster and state and local governments have reduced their spending.
The dollar index, which tracks the greenback against a basket of six rivals, was steady on the day at 95.551, not far from Friday’s high of 95.594, its loftiest level since August 16.
Citing positive economic data, Fed chair Janet Yellen said the central banking system is moving in the direction of higher interest rates but offered no hint as to when that would happen.
From Chair Yellen, “Looking ahead, the FOMC expects moderate growth in real gross domestic product (GDP), additional strengthening in the labor market, and inflation rising to 2 percent over the next few years” is clearly a positive view of the economy.
While investors will be awaiting Friday’s non-farm payrolls for the USA for a strengthening case for a rate rise at the Fed’s meeting on September 26-27, as well as commentary from four Fed speakers throughout the week, there is plenty of action to keep local traders occupied. And has the stock market been propped up by this interest rates? She described consumer spending as “solid” but noted that USA business investment was weak and exports hurt by a strong dollar. The yield on the 10-year Treasury note fell to 1.56 percent.
“Chairwoman Yellen put a magnifying glass on next Friday’s jobs report”.
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During the first half of 2016, the economy expanded at a lackluster 1% annual pace following growth of 2.6% past year.
