The Standard & Poor’s 500 Index dropped 1.1 percent on Wednesday as tumbling oil prices sparked a broader selloff in equities and Federal Reserve Chair Janet Yellen laid the groundwork for a December interest-rate increase by signaling higher confidence in the US economic outlook.
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Federal Reserve Chairperson Janet Yellen will speak at two events in Washington, where she is expected to uncover the interest rate trajectory.
As in previous speeches and public appearances, Yellen said the timing of the first USA rate increase in almost a decade was not as important as the path of subsequent hikes, which policymakers expect will be gradual.
She said that when the Fed chose to raise rates, the decision would be “a testament, also, to how far our economy has come in recovering from the effects of the financial crisis and the Great Recession”.
Yellen made no comment on whether the Fed will raise its benchmark federal funds rate at its next meeting on December 15-16.
“That requires the USA economy to shrug off the start of the tightening cycle, and the market then to become more comfortable with the prospect of a longer-lasting uptrend in US rates”.
The Fed watches such geopolitical risks very carefully, Yellen said.
This delay would “likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals”, she told an audience at the Economic Club in Washington.
US employers added 271,000 jobs in October, the most this year, and unemployment has dipped to 5 percent, half of its 2009 peak.
“It is a day that I expect we all are looking forward to”, she said. Before making the decision next week on interest rates, Fed officials see the government’s estimate on Friday of November job growth.
Definitely. The U.S. economy is finally returning to near full health 6½ years after Great Recession officially ended.
On Tuesday the ISM index for the manufacturing sector showed a contraction in November, the first such setback in three years.
When the Fed votes, Yellen said she will not be concerned if the 10 voting members of the Fed’s policy committee are not unanimous.
Weak foreign economic growth and the strong value of the U.S. dollar have had a negative impact on USA exports, Federal Reserve Chair also noted.
“Short of saying “We are going to hike rates in two weeks” time’, Ms Yellen’s remarks could hardly have been clearer”, wrote Mr Ian Shepherdson, chief economist at Pantheon Macroeconomics.
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“To begin with, I believe that a significant number of individuals now classified as out of the labor force would find and accept jobs in an even stronger labor market”, she said.
