Fed rate hike still on the cards before year end

The dollar is firmer after Federal Reserve Chair Janet Yellen reiterated her expectation that the U.S. central bank would lift rates this year.

Her relatively upbeat comments on Thursday may come as a surprise to some investors who took last week’s decision as a sign that a policy tightening was no longer imminent and would likely come next year. Yellen said she expects the U.S. central bank to begin raising interest rates later this year as long as inflation remains stable and the U.S. economy is strong enough to boost employment.

Yellen, who spoke a week after the Fed delayed a long-anticipated rate hike, said she and other Fed policymakers do not expect recent global economic and financial market developments to significantly affect the central bank’s policy.

That message, along with Yellen’s contention that recent inflationary weakness is likely transitory, may come as a surprise to some investors who took last week’s decision as a sign that a policy tightening was no longer imminent and would likely come next year.

Much of the recent price weakness is due to special factors such as a strong dollar and low oil prices, which are likely to fade, Yellen said, allowing U.S. inflation to rise to a 2-percent goal over the next few years.

She and the policy-making Federal Open Market Committee (FOMC) expect the world’s largest economy to be strong enough to achieve maximum employment and to keep expectations for prices stable, she said.

“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,” said Yellen at her speech at the University of Massachusetts, Amherst.

As it stands, she said, U.S. economic prospects “generally appear solid.”

The post Fed rate hike still on the cards before year end appeared first on Forex Circles.

Source:: Fed rate hike still on the cards before year end

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