In the most awaited speech of this summer, the Fed chair speaking at the annual Jackson Hole Symposium at Jackson Hole, Wyoming said that, “The case for an increase has strengthened in recent months”.
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Bonds were unchanged earlier on Friday after data showed that US economic growth was a bit more sluggish than initially thought in the second quarter as businesses aggressively ran down inventories of unsold goods, offsetting a spurt in consumer spending.
The Fed’s monetary policy statement in July contained upbeat language that appeared to open the door to a rate hike as early as its next meeting in September.
She, however, also said that future rate increases should be “gradual”.
“In addition to taking the federal funds rate back down to almost zero, the FOMC could resume asset purchases and announce its intention to keep the federal funds rate at this level until conditions had improved markedly – although with long-term interest rates already quite low, the net stimulus that would result might be somewhat reduced”, she said. She also reiterated that the decision on interest rates will “always depend on the degree to which incoming data continues to confirm the Fed policy committee’s outlook”.
Janet Yellen, chair of the US Federal Reserve, said improvements in the economy suggested the world’s biggest economy might be almost ready for an increase.
Spot gold was down 0.2 per cent at $1,320.40 an ounce at 1332 GMT, while United States gold futures for December delivery were down $6.40 an ounce at $1,323.30.
Making its first hike in almost a decade, the US Federal Reserve raised rates last December, but has avoided further increases so far this year owing to the continuing global economic slowdown and volatility in major financial markets.
After a weak start in Tokyo stocks, the dollar dropped below ¥100.40 but attracted buybacks after the market resisted further falls.
US crude’s West Texas Intermediate (WTI) futures rose 56 cents, or 1.2 percent, to $47.33.
In December 2015 the Fed increased interest rates a quarter percentage point after seven years of keeping rates near zero. China’s Shanghai Composite was up 0.4 percent at 3,080.15.
The U.S. central bank hiked rates for the first time in almost a decade in December.
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“I don’t think people want to trade without knowing what Yellen will say tomorrow”, said Kepner who believes there is “no harm” in the Fed waiting until December to tighten monetary policy. She said the Fed still planned to wind down its massive balance sheet, but that such an effort would take time.
