Speaking at the annual gathering of financiers at Jackson Hole in Wyoming, Ms Yellen said: “In light of the continued solid performance of the labour market and our outlook…”
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Yellen told the gathering of central bankers from around the world the US economy was nearing the central bank’s goals of maximum employment and price stability but she maintained that future hikes should be “gradual”. She also described consumer spending as “solid”, but noted that business investment was weak and exports were taking a hit from a strong US dollar.
“With inflation still below the target, action remains contingent on the data”, he said.
United States stocks rose in early trade Friday after Federal Reserve Chair Janet Yellen said the United States economy was sound and the argument had grown for an interest rate increase.
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.
Belisle said if the markets interpreted Yellen’s comments as more hawkish, that benefited the USA dollar.
Bond prices fell. The yield on the 10-year Treasury note rose to 1.62%.
The Fed raised its target range for the federal funds rate by 25 basis points to 0.25-0.5 percent in December a year ago, the first rate hike in almost a decade.
Yellen said the economy was nearing the central bank’s goals of maximum employment and price stability, but maintained that future hikes should be “gradual”.
The Fed had at the end of 2015 raised rates for the first time in almost decade, ending the policies created to respond immediately to the Great Recession.
“While economic growth has not been rapid, it has been sufficient to generate further improvement in the labor market”, she said.
The unemployment rate stood at 4.9% in July, with the August jobs report due in the coming days.
The Fed has also been charged with increasing inequality with its bond buying programme and negative rates, and with being overoptimistic in its forecasts of economic recovery and the pace of interest rate hikes. This had then marked the first rate hike in almost a decade. Vice Chair Stan Fischer told a group in Aspen, Colorado, that the Fed is close to its targets and that USA growth is on the rise. That report showed USA growth in the second quarter was slightly lower than previously thought, rising at a 1.1 percent annual rate.
Yellen on Friday defended the models used by the Federal Reserve.
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“Ultimately, we think Yellen’s speech really doesn’t give us anything new. No, it’s just maintaining optionality”, said Gennadiy Goldberg, an interest rate strategist at TD Securities in NY.
