Yellen is to address the gathering on Friday.
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The United States Federal Reserve is getting closer to raising interest rates again, the head of the central bank and other policymakers said on Friday in comments that left the door open for a hike as early as next month. “I think she’ll be saying it is looking like they will raise rates in the not too distant future but won’t tie her hands further than that”.
The remarks were made in a speech in Jackson Hole, Wyoming. At the same time, consumer spending, which makes up more than two-thirds of economic activity, grew at the fastest rate since the fourth quarter of 2014.
The Fed may also want to explore other options, including broadening the range of assets it can purchase, raising the inflation target, or targeting nominal GDP, she said.
Fed Chair Janet Yellen told a global monetary policy conference that the case for a rate increase had grown stronger, while Fed Vice Chair Stanley Fischer suggested a move could come at the central bank’s September policy meeting if the economy was doing well. The Fed has policy meetings scheduled in September, November and December.
Two close Yellen allies – William Dudley, president of the Federal Reserve Bank of NY, and Stanley Fischer, the Fed’s vice chairman – suggested in the past week that a strengthening economy would soon warrant a resumption of the rate hikes the Fed began in December. The rate had been kept near zero since the depths of the 2008 financial crisis.
Wall Street closed mixed Friday as investors weighed comments from Fed Chair Janet Yellen on a possible interest rate hike. And some have said that if the Fed does decide to act in September, it would need to further prepare investors.
Traders prefer to invest or hold currencies in nations where interest rates are rising – or expected to rise – in the hope of increasing their potential returns. But not all Fed policymakers are on board for a rate increase soon.
The conference’s theme is “Designing Resilient Monetary Policy Frameworks for the Future”, reflecting concern that the global economy has become trapped in a slump of low growth and low inflation and uncertainty about how central banks should respond.
Ms. Yellen noted that a near-term decision on rates hinges on the strength of upcoming data, such as next Friday’s U.S.jobs report.
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Because slower growth means future US interest rates will likely also need to be lower on average, some analysts have suggested that the Fed will have less room to fight future recessions because there will be less room to cut rates. “If we have a lousy number, sure, you would take the Fed off the table”. The 2-year is the most Fed sensitive part of the curve.
