Date
13 December 2017
Fed chief Janet Yellen expects the US economy to exceed its long-term trend during the second half of the year. Photo: Reuters
Fed chief Janet Yellen expects the US economy to exceed its long-term trend during the second half of the year. Photo: Reuters

US economic recovery warrants further rate hikes: Yellen

The strength of the US labor market calls for continued gradual increases in interest rates despite subdued inflation, Federal Reserve Chair Janet Yellen said on Sunday.

In a speech in Washington, the central bank chief also said she expects the economy to exceed its long-term trend during the second half of the year, Reuters reports.

The impact of recent hurricanes on the US economy should be temporary, Yellen said.

“We will be paying close attention to the inflation data in the months ahead,” Yellen was quoted as saying in prepared remarks at an international banking seminar. 

The Fed voted to hold interest rates steady at its last policy meeting in September. Since then, Yellen has repeatedly acknowledged rising uncertainty on the path of inflation, which has been retreating from the Fed’s 2 percent target rate for much of the year.

Minutes from the September meeting, released last Wednesday, showed policymakers had a broad debate about recent soft inflation and the impact on interest rates if it fails to rebound.

In her speech, Yellen said the most recent wage gains contained in the September jobs report were encouraging and that she expects the central bank to raise interest rates further.

“We continue to expect that the ongoing strength of the recovery will warrant gradual increases in that rate to sustain a healthy labor market and stabilize inflation around our 2 percent longer-run objective.”

The central bank has raised interest rates four times in its tightening cycle which began in late 2015. The Fed currently predicts one more rate rise this year and three the next.

The Fed has two more scheduled meetings this year, in November and December. 

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RC

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