From the FXWW Chatroom: Federal Reserve Chair Janet Yellen expects to increase the key US lending rate a few times a year until it is “close to” 3%, the central bank’s estimate of the longer-run neutral rate. The US economy is near maximum employment and inflation is nearing the Fed’s 2% objective, Yellen said in a speech in San Francisco on Wednesday. Still, “by some measures, there may still be some room for progress in the job market,” she said. “For instance, wage growth has only recently begun to pick up and remains fairly low,” Yellen said. “A broader measure of unemployment isn’t quite back to its pre-recession level. It includes people who would like a job but have been too discouraged to look for one and people who are working part time but would rather work full time.” The Federal Open Market Committee raised the target range on its benchmark Federal funds lending rate for the first time in a year last month, and Yellen said the move “reflects our confidence the economy will continue to improve.” “As the economy approaches our objectives, it makes sense to gradually reduce the level of monetary policy support,” Yellen said. “Waiting too long to begin moving toward the neutral rate could risk a nasty surprise down the road — either too much inflation, financial instability, or both. In that scenario, we could be forced to raise interest rates rapidly, which in turn could push the economy into a new recession.”
The probability that the FOMC will maintain the rate in the current range of 0.5% to 0.75% stands at 96%, according to the CME Group’s FedWatch tool. Inflation in December increased 0.3% on a monthly basis and accelerated 2.1% year-on-year. “Right now our foot is still pressing on the gas pedal, though, as I noted, we have eased back a bit,” Yellen said. “Our foot remains on the pedal in part because we want to make sure the economic expansion remains strong enough to withstand an unexpected shock, given that we don’t have much room to cut interest rates.”
FED’S YELLEN SAYS IT’S IMPORTANT INVESTORS TAKE UNCERTAINTY INTO ACCOUNT
FED’S YELLEN SAYS EXPECTATIONS FOR GRADUAL RATE RISES PARTLY EXPLAINS PRICE-EQUITY RATIOS
FED’S YELLEN SAYS LEVEL OF INTEREST RATES IS ONE INFLUENCE ON ASSET VALUATIONS, INCLUDING STOCK PRICES
FED’S YELLEN SAYS AT THE MOMENT REGARD RISKS TO FINANCIAL STABILITY AS MODERATE
FED’S YELLEN SAYS STRONGER DOLLAR HAS ALSO REFLECTED EXPECTATIONS OF FISCAL POLICIES
FED’S YELLEN SAYS EXPECTATIONS FOR GRADUAL RATE RISES PARTLY EXPLAINS PRICE-EQUITY RATIOS
FED’S YELLEN SAYS LEVEL OF INTEREST RATES IS ONE INFLUENCE ON ASSET VALUATIONS, INCLUDING STOCK PRICES
FED’S YELLEN SAYS AT THE MOMENT REGARD RISKS TO FINANCIAL STABILITY AS MODERATE
FED’S YELLEN SAYS STRONGER DOLLAR HAS ALSO REFLECTED EXPECTATIONS OF FISCAL POLICIES
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