Federal Reserve Chair Janet Yellen confirmed that the Fed is on course of hiking the interest rates later this year, but also expressed concern about the headwinds that are causing the US economy to hold back.
According to her, the face of the economy and inflation is totally uncertain. This statement has come out when the labor market has been weakened and new potential threats from overseas have been received.
This is the first time since Fed’s June meeting that Yellen is speaking about the economy. She believes that the consumer spending trend has picked up pace lately and the employment rate is rising up. Yellen said, ““Based on my outlook, I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate.”
There are an ample of concerns that she expressed including weaker wage growth to a low labor participation rate. This has led to the reduction in productivity, which is a threat to the economy. Yellen confirmed that the inflation is way below the Fed’s 2 percent target. She said that the business owners are very cautious currently and they have not expanded their capital expenditures. These comments were recorded at a speech given by her in Cleveland.
The ongoing Greek crises along with the plunge in China’s stock market are posing potential threats.. This had been discussed in the previous meeting of Fed that was held on June 16-17. Yellen stressed that the Greek issue has remained unsolved until now. However, she has noticed a start in recovery for the 18 nation Eurozone. The developments in China, however, weren’t discussed by her in the speech.
These developments have pushed a substantial number of economists to just push back their projections for the Fed’s first rate hike from the period of September to December. The next meeting of the Fed is about to take place between July 28-29. However, there is no plan in anticipation from the end of Fed yet.
[ Press Release ]