One of the Federal Reserve’s most dovish officials said on Friday that September may turn out to be the right time to raise interest rates if the USA economy continues to improve, and he set a relatively high hurdle for delaying the move until next year.
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Speaking in Cleveland, Yellen reaffirmed her view Friday that America’s central bank intends to raise its key interest rate this year for the first time since 2006.
“””(The Fed) wants to signal to everybody that the economy is getting back to normal”, he said, “but they’re not in a hurry to raise the rate significantly until next year at the earliest”.
She also outlined a host of concerns: from weak wage growth to a low labor participation rate to “disappointing” productivity.
In the speech, Yellen focused mainly on domestic US economic developments and did not mention the market turbulence In China and just made a short reference to the Greek debt drama that has roiled markets in recent weeks.
“Looking further ahead, I think that many of the fundamental factors underlying USA economic activity are solid and should lead to a few pickup in the pace of economic growth in the coming years”, Yellen said. “This type of situation would leave less scope for the FOMC to respond with its conventional monetary policy tool-namely, a cut in the federal funds rate-to counteract a weakening in the economy”.
Addressing the City Club of Cleveland, Ms Yellen said that the economy is near the point where it does not need the support of rates at such an extraordinarily low level.
After Federal Reserve’s June meeting, this was the first time Ms. Janet has discussed regarding the economy and she seemed to display positivity as consumer spending has been increasing and employment is most likely to be expanding. Even as labor markets have improved, data on core inflation have remained weak; the Federal Open Market Committee has stated that there must be reasonable conference that inflation will reach the 2 percent goal over the medium term in order for the Fed to begin to increase short-term rates. That might signal that Yellen isn’t too worried about any spillover into the American economy, or it may be something she was not yet prepared to talk about.
About 5.67 billion shares traded on all US platforms, as indicated by BATS exchange data, compared with the month-to-date average of 7.03 billion. Benchmark 10-year Treasuries prices fell 30/32 in price for a yield of 2.410 percent, up 11 basis points from Thursday.
She also said the economic recovery in the 18-nation eurozone “appears to have gained a firmer footing”. “The big deal is will growth continue at a good clip”, said IHS Global Insight chief economist Nariman Behravesh.
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Next week, Ms. Yellen will deliver her semiannual testimony to Congress.
