Gold Silver Reports — Rate-Hike Case has Strengthened: Yellen — Fed chief says continued performance of labour market and outlook for economic activity and inflation solid enough for hikes `over time’
Federal Reserve Chair Janet Yellen said the case to raise interest rates is getting stronger as the US economy approaches the central bank’s goals.
“In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months,“ she said in a speech Friday to central bankers and economists in Jackson Hole, Wyoming.
Yellen also said the economy is “nearing“ the Fed’s goals of full employment and stable prices. The Fed chair didn’t discuss the specific timing of a rate move in her first public comments since June.
“September is certainly on the table, a possibility, and being considered,“ said Laura Rosner, senior US economist at BNP Paribas in New York. “She strongly is keeping that in place. I think she’s putting the emphasis on the data and how the labor market performs, and that’s really what we should be watching.“
The Federal Open Market Committee raised its target for the federal funds rate to a range of 0.25% to 0.5% in December, after keeping the benchmark near zero for seven years. The FOMC’s next meeting is on September 20-21.
Despite their repeated intentions to raise the rate again, officials have skipped a hike at all five meetings this year, and futures markets have priced in about a 30 percent chance of another increa se next month, the second-to-last gat hering before pre sidential elections in November.
“While economic growth has not been rapid, it has been sufficient to generate further improvement in the labor market,“ Yellen said at the Kansas City Fed’s annual conference, the title of which is “Designing Resilient Monetary Policy Frameworks for the Future.“
“Looking ahead, the FOMC expects moderate growth in real gross domestic product, additional strengthening in the labor market, and inflation rising to 2% over the next few years,“ Yellen said. “Based on this economic outlook, the FOMC continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near our statutory objectives.“
A Commerce Department report released earlier Friday showed the US economy grew less than previously reported last quarter on lower government outlays and a bigger depletion of inventories, capping a sluggish first-half performance propped up mainly by consumer spending. Gross domestic product, the value of all goods and services produced, rose at a 1.1% annualised rate, down from an initial estimate of 1.2%, the report showed. “If there was some doubt about whether or not rates will come up this year, there are fewer doubts today ,“ said Roberto Perli, a partner at Cornerstone Macro LLC in Washington. “September?
Let’s see how the employment data come in. If it’s another strong one, a lot of people on the FOMC will have a strong case to move.“
The US Labor Department releases the August payroll report on September 2. Analysts surveyed expect employers added 185,000 jobs last month after adding 255,000 in July , and they predict the unemployment rate nudging down to 4.8%. — Neal Bhai Reports