Yellen is to address the gathering on Friday.
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In her speech in Jackson Hole, Wyoming, Yellen noted that the Fed is moving toward raising interest rates in light of a solid job market and an improved outlook for the economy. She said solid growth in household spending had led to an expansion of the USA economy.
The decision will likely be made after a Labor Department report, expected September 2, which could show steady improvements in hiring and lead to a rate increase, the Wall Street Journal said Friday.
“Based on this economic outlook, the FOMC continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near our statutory objectives”, she added.
Yellen said that level of uncertainty should be taken as a fact of life.
In a mid-day interview on CNBC after Yellen spoke, the Fed’s No. 2 policymaker, Vice Chair Stanley Fischer, suggested that rate hikes were on track for this year. Such a report could tilt Fed officials toward a rate increase.
For now, the USA presidential election is not a concern for markets, though comments from Democrat Hillary Clinton about Mylan’s pricing of EpiPen hit that stock hard and sent the S&P health-care sector lower.
Focusing on the Fed, if traders sense reluctance from Yellen to hike interest rates at the next policy meeting on September 21, then it is possible for the euro to make another sustained attempt to rise towards $1.14 against the United States dollars in early September. “We think the evidence is that the economy has strengthened”. Redfin’s Nela Richardson argued it might be crying hawk – that is, acting like it will raise rates twice this year, but backing out at the first sign of trouble.
Chris Rupkey, chief financial economist at Mitsubishi UFG Financial Group, said Yellen’s statement “is an old-fashioned signal that they are very likely to raise rates on September 21”.
Some economists have said they think conditions are ripe for the Fed to alert investors that it may be inclined to act at its next policy meeting, September 20-21.
Still, Yellen has left a room open for prolonging her inaction on the rate front by saying that future data releases will set the direction. Low rates encourage borrowing and risk-taking, which can bolster economic growth.
But to combat future downturns, she said the Fed should explore other options, too.
Without any specific timetable for rate hikes many remain sceptical about the certainty of hikes. But she said those options would require more study.
“Prices bounced back with a vengeance after Yellen began to speak”, said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida. She said efforts need to be made, in particular, to boost the productivity of USA workers.
And they also have to consider other less fortunate developed economies, many of which have only limited choices now in their monetary policy toolkit to stimulate growth.
“A possible September hike is off the table, but for sure they will start the hiking process quite soon, so chances are the bets will be on December if we totally don’t get disappointing data in Q3”.
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“Our communities are being sacrificed for an inflation enemy that isn’t here”, said Rod Adams, a community organizer for Neighborhoods for Change in Minnesota.
