Yellen Signals More Rate Hikes
World Economy

Yellen Signals More Rate Hikes

With monetary policy still modestly accommodative, the US central bank should continue to raise interest rates slowly to keep jobs plentiful and inflation low, Federal Reserve Chair Janet Yellen said on Thursday.
“I think that allowing the economy to run markedly and persistently “hot” would be risky and unwise,” Yellen said in remarks prepared for delivery to the Stanford Institute for Economic Policy Research, CNBC reported.
While there are no signs as yet that the Fed is behind the curve or the economy is in danger of a sudden surge in inflation, she said, “I consider it prudent to adjust the stance of monetary policy gradually over time.”
The Fed last month raised its short-term interest-rate target for only the second time in a decade, but signaled it would likely speed up the pace of rate hikes this year. Rates are currently targeted at between 0.5% and 0.75%.
With unemployment, at 4.7%, near what many economists including Yellen see as its long-run sustainable level, and inflation closing in on the Fed’s 2% goal, most Fed officials expect to lift rates three times over the course of the next 12 months.
Some left-leaning economists and activists have urged the Fed to keep rates low to provide more opportunities for the jobless and to push up on wages, whose growth has been tepid.
Meanwhile Republican Donald Trump, who is set to become the next US president on Friday, has promised a set of economic policies including tax and regulatory reform aimed at boosting economic growth.
Yellen for the second time in two days warned that a delay in tightening monetary policy could drive up inflation and force the Fed to jack up rates in response, sending the economy into a tailspin that might have been avoided if the rate hikes had been more gradual.
But, she said, it “will not be easy” to find a path of rate hikes that can foster strong jobs growth and 2% inflation, given the uncertainties of global growth, slow domestic productivity growth, and a change in fiscal policies, among others.
In addition, the downward pressure that the Fed’s $4.5 trillion balance sheet has been exerting on rates for the last several years is declining, she said, making calibrating rate hikes more complicated.
The Fed consults a range of policy rules, including one developed by Stanford Professor John Taylor, to guide its decisions on rates, Yellen said. But those rules cannot be mechanically implemented because they do not take into account the lack of flexibility the Fed has in dealing with shocks when rates are low, nor many other important factors, she said.

Short URL : https://goo.gl/TTlnPG
  1. https://goo.gl/9tbmGs
  • https://goo.gl/yb4z6P
  • https://goo.gl/XMVHqy
  • https://goo.gl/12lind
  • https://goo.gl/iUYpKZ

You can also read ...

South Korea Economy Facing Downside Risks
The South Korean economy will face some downside risks going...
Diesel Emissions Scandal a Risk to German Economy
The emissions scandal ensnaring German carmakers is a risk to...
Marlo Draghi (L) and Janet Yellen at the Jackson Hole Economic Policy Symposium in Jackson Hole, Wyoming on January 7.
Stock markets have spent the year rising on bets of a...
Deals outside Turkey are much cheaper and better  than Turkish opportunities.
Robert Yuksel Yildirim had barely been at the family’s...
The London Metal Exchange
World stocks struggled at a 5-1/2-week low on Monday, though...
Madura Says Will Tackle Inflation
The Venezuelan government’s toughest challenge is fighting...
Greek Current A/C Surplus Shrinks
Greece’s current account surplus shrank in June compared to...
Thai Q2 GDP Surprises With 3.7% Rise
Thailand’s economy continued its recovery in the second...

Add new comment

Read our comment policy before posting your viewpoints

Enter the characters shown in the image.