The markets are betting the FOMC will raise interest rates by a quarter percent at the December 13-14 meeting, but some economists say the Fed won’t do a rate hike in 2016.
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– Janet Yellen, the Federal Reserve Board chairwoman, said Friday that she saw a stronger case for raising the Fed’s benchmark interest rate, suggesting the central bank was likely to act in the coming months.
The U.S. economy grew at an annual rate of 1.1 percent in the second quarter this year, down from a previous estimate of 1.2 percent, the Commerce Department said Friday. US stock prices see-sawed, ending the trading session generally lower, while prices of US Treasuries were mostly weaker.
Stanley Fischer, the vice chair of the Fed, echoed Yellen’s view that the economy is doing well, especially in terms of jobs growth.
In her much-awaited speech, Yellen said the case for raising United States interest rates had strengthened, although increases should be gradual. She pointed to steady gains in employment and strength in consumer spending. “Investors will closely watch for cues on Fed chair’s thinking to fine-tune the trajectory of Fed rate hike”, Citi said. The three are viewed as the core of the USA central bank, and the most influential in setting policy.
Financial observers pay close attention to the Fed’s communication for hints about its future plans, but Yellen did not provide a specific date for a rate hike. Investors see much smaller chances of hikes in September or November.
The dollar fell to 100.45 yen from 100.58 yen the previous day.
The job market is humming, and so are the US financial markets, with major stock indexes near record highs.
She noted that the labor market is improving with job gains averaging 190,000 a month over the past three months.
Yellen was speaking at a Fed conference on designing new monetary policy frameworks, with central bankers eager to find new ways to stimulate economies even after they have cut ratesto near zero and flooded banks with money. The price of West Texas Intermediate oil, the US benchmark, was up 20 cents to $47.53, while the price of Brent crude, the global benchmark, increased 5 cents to $49.72. Citing continued expansion in USA economic activity, especially housing spending, plus an inflation rate running below the FOMC’s desired two percent level, Yellen wondered aloud if this was the right time for another rate increase.
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“That will probably weigh in our decision, along with other data that may come in”, Fischer said in an interview on CNBC.
