Yellen: ‘December rate hike possible, not certain’

Deutsche Welle
3 Min Read

Fed Chair Janet Yellen told lawmakers the US economy is “performing well” and a December rate hike could be justified. But she reiterated that the central bank’s monetary policy committee had not made a decision yet.
Federal Reserve Chair Janet Yellen said a rate hike in December was a “live” possibility, but not a certainty. In testimony before a congressional committee, Yellen reiterated the Fed’s October statement that the bank’s monetary policy committee expected the US economy to continue to expand.

“What the committee has been expecting is that the economy will continue to grow at a pace that is sufficient to generate further improvements in the labor market and to return inflation to our 2-percent target over the medium term,” Yellen said.

The Fed has kept its benchmark interest rate at an unprecedented near-zero range since December 2008. Investors around the globe have been speculating about the timing of the first interest rate hike in almost seven years.

“We have made no decision about it,” Yellen emphasized. She said the US economy was “performing well” with solid growth in domestic demand. Risks from global economic and financial developments had “diminished,” though US exports remained soft, she said.

The continued lack of inflation below the Fed’s long-term target was in part due to the crash in oil prices since 2014 and the stronger dollar, which had made imports cheaper over the last year, Yellen said.

Dual mandate

The driving factors in US monetary policy are the labor market and inflation – the Fed’s so-called dual mandate. The absence of inflation in an economy in recovery since 2009 has been a key reason the US Federal Reserve has hesitated to raise interest rates so far this year.

Yellen reiterated her warning that an initial hike in interest rates was less important than the longer trend, which was likely to maintain historically slack monetary policy for years to come.

“The monetary policy committee does feel that moving in a timely fashion, if the data and the outlook justify such a move, is a prudent thing to do because we will be able to move at a more gradual and measured pace,” Yellen said.

The Fed’s next policy meeting is due December 16.

tko/hg (dpa, Reuters)

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