Date
25 May 2017
Janet Yellen says a gradual interest rate rise is appropriate if the US economy keeps gaining strength. Photo: Reuters
Janet Yellen says a gradual interest rate rise is appropriate if the US economy keeps gaining strength. Photo: Reuters

Yellen sees Fed rate hike within months

US interest rastes are likely to rise within months if th US economy keeps gaining strength.

Federal Reserve chief Janet Yellen said a gradual increase is appropriate “probably in the coming months”, the Wall Stret Journal reports.

This leaves the door open for a move as soon as the Fed’s next policy meeting June 14-15 or at its gatherings in July or September if officials prefer to wait for more economic data.

After a couple of weak quarters, “growth looks to be picking up from the various data that we monitor,” Yellen said.

Indices of consumer confidence and spending, housing-market activity and industrial production all gained steam during the spring months.

Forecasting firm Macroeconomic Advisers on Friday projected growth in gross domestic product, a broad measure of the goods and services produced across the economy, would accelerate to a 2.5 percent annual rate in the second quarter from the first quarter’s 0.8 percent pace.

In another positive sign, US corporate profits show signs of stabilizing, though American companies still face earnings pressure due to rising wage growth and a still-weak global economic expansion.

A key measure of corporate profits—after taxes, without inventory valuation and capital-consumption adjustments — rose at a 1.9 percent pace in the first three months of 2016 after declining the prior two quarters, the Commerce Department said Friday.

Still, on an annual basis, profits in the first quarter were down 3.6 percent for the second straight quarter, and profits as a share of the overall economy remain depressed from the record levels reached earlier in the expansion.

The resilience of corporate profits in the months ahead will be key to supporting the stock market, which has returned near the all-time highs reached in the spring of 2015, and critical to firms’ ability to hire workers and invest in new equipment and facilities.

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