Yellen: Rate hike later this year, inflation will improve
September 24, 2015, 11:44 pm

File photo of Fed Chief Janet Yellen who Thursday said that an interest rate hike will likely occur later this year [Xinhua]

However, she said that a rate hike is likely this year, adding that US economic prospects “generally appear solid”.

“Most FOMC participants, including myself, currently anticipate that achieving these conditions will likely entail an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter,” she told students and educators at the Amherst campus.

She admitted that a low inflation rate is hurtful for pulling the US economy away from recession, but said she is confident that it will move toward the Federal Reserve’s target of 2 per cent.

However, she also cautioned that raising interest rates should not be delayed too long lest tightening of monetary policy come too abruptly, with negative consequences on the economy.

Global, particularly US, markets were feeling nervous ahead of her speech.

Stocks reversed Tuesday’s gains and fell across the board; the biggest negative impact was on commodities and energy markets.

At closing bell, the Dow Jones Industrial Average had fallen 0.5 per cent, while the S&P 500 fell 0.3 per cent.

Nasdaq closed down 0.38 per cent.

Most market analysts had last week anticipated that the Fed would end months of often nervous anticipation and announce a rate hike. The interest rate remains at 0 to 0.25 per cent.

“The committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its two per cent objective over the medium term,” the Fed’s Open Market Committee (FOMC) said in a statement released following their two-day meeting last week.

The FOMC also said it feared the effects of global volatility on its efforts to prevent inflation rates from falling.

Meanwhile, the US Department of Labor said Thursday morning that jobless claims rose by 3,000 to 267,000 in the week ending September 19.

The statistics are better than industry expectations and indicate a stronger job market. The unemployment rate was 5.1 per cent for August.

The BRICS Post with inputs from Agencies