Federal Reserve Chair Janet Yellen said Friday that the case for raising interest rates has strengthened in light of a solid job market and an improved outlook for the USA economy and inflation.
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In this undated photo, the Federal Reserve headquarters are pictured in Washington, D.C. Comments Friday from Fed chief Janet Yellen did not indicate when the USA central bank might raise rates, but reinforced the view that such a move could come later this year.
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”.
Federal Reserve Chairwoman Janet Yellen seemed to signal the Fed will raise interest rates in a speech Friday in Jackson Hole, Wyo. And she said that economists should be studying proposals for a wholesale shift in strategy, such as raising the Fed’s inflation target or setting a goal for broader economic growth.
“The minutes of the July 26-27 FOMC meeting, along with comments by Bill Dudley of the New York Fed, created some buzz about the possibility of a Fed funds rate increase in September”, Dye said.
Federal Reserve chair Janet Yellen defended the effectiveness of the USA monetary policy regime.
The price of Gold futures witnessed its biggest weekly fall in more than one month, as investors analysed the comments made by Janet Yellen in her speech at the Jackson Hole economic symposium and some other comments made by top Federal Reserve officials concerning the likelihood of an interest rates hike.
Minh Trang, a senior currency trader at Silicon Valley Bank in California, said: ‘The overall takeaway not just from Yellen but for the week is that all the Fed officials have all taken a hawkish bent.
The US central bank lifted the rate for the first time in nearly a decade last December – to 0.5 per cent – and outlined plans for a series of hikes throughout 2016. Mirroring the market’s swings, the CBOE Volatility index.VIX, known as Wall Street’s “fear gauge”, was trading at a 7-week high of 14.15, up 9.2%.
At the time, the Fed foresaw four additional rate increases in 2016.
Markets remained skeptical of the Fed’s rate hike projections largely because of the perceived wide gap between what it has signalled and ultimately delivered. The central bank could begin pumping money into the economy again or promise to keep rates lows – two pillars of its response to the Great Recession.
“The evidence of the past 15 years in Japan and certainly in the past six years in the United States suggest otherwise”, said Gross, manager of the Janus Global Unconstrained Bond Fund.
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Yellen said that while the Fed’s support had been critical in supporting the economy, political leaders should considering using the government’s tax and spending powers as well.
