The U.S. economy is “now nearing the Federal Reserve’s statutory goals of maximum employment and price stability”, Yellen said.
Advertisement
Federal Reserve Chair Janet Yellen said in a speech on Friday that the case for raising interest rates has strengthened in recent months, but she was mum on when the central bank might pull the trigger on raising rates.
After today’s remarks, there is now an increasing possibility that the Fed may even act as early as the meeting in September or October.
Citigroup said in a research note Friday that investors across the region were focused on Yellen’s speech at the Jackson Hole symposium, an annual gathering of policymakers.
“As ever”, she said, “the economic outlook is uncertain, and so monetary policy is not on a preset course”. The Nasdaq composite dipped 12 points, or 0.2 percent, to 5,200.
In light of the economy’s gains, the Fed chair said the case for an increase in the central bank’s key policy rate “has strengthened in recent months”.
Analysts said it’s possible for the Fed to hike interest rates as soon as September. She, however, failed to disclose the timing of the potential rate hike. A number of observers, some economists and investors among them, believe the odds are higher for a rate increase at the December meeting or in 2017.
The initial job numbers we saw this June and July were stronger than the initial gains leading up to the 2015 hike.
“Looking ahead, the FOMC expects moderate growth in real gross domestic product, additional strengthening in the labor market, and inflation rising to 2 percent over the next few years”, Yellen said in her prepared remarks. This had then marked the first rate hike in almost a decade.
PROFIT PICTURE: Earnings per share for companies in the S&P 500 index are expected to fall 1.8 percent in the second quarter, according to S&P Global Market Intelligence.
After all, Yellen said in May that a rate increase would be appropriate over the summer months.
Yellen’s words returned a measure of clarity on the intentions of United States monetary policymakers, who have been publicly at odds in recent months over the need to raise rates in the near-term.
Markets have been watching closely for signs the Fed is ready to start raising USA interest rates, a move that would lift the U.S. dollar and push down the kiwi.
Advertisement
Other data in investors’ crosshairs next week include personal consumption on Monday, consumer confidence on Tuesday, and auto sales and factory activity on Thursday.
