Yellen: Case for raising rates is strengthening

by Frankie Norman September 9, 2016, 2:42
Yellen: Case for raising rates is strengthening

But Yellen said the jobs market is nearing full employment and inflation is ticking toward the Fed's 2 percent goal, despite downward pressure from "the transitory effects of earlier declines in energy and import prices".

The bank also has meetings on November and December.

The perceived chances of a rate hike in September climbed to 36 percent from 21 percent the previous day, according to CME Group's FedWatch tool.

Yellen earlier this year had said Britain's surprise June vote to exit the European Union had been one factor causing the Fed to forestall an increase in rates.

BOND REACTION: U.S. government bond prices rose slightly following Yellen's speech, suggesting investors aren't anxious about rates increasing soon.

Many other country's central banks are not now planning to raise rates, due to a sluggish global economy, and many observers question the wisdom of a rate increase by the Fed.

The Fed raised rates for the first time in almost a decade last December, from around zero to between 0.25 per cent and 0.5 per cent, but has kept them there ever since.

Fischer, speaking in an interview with CNBC at Jackson Hole, said "the evidence is that the economy has strengthened".

The Commerce Department said Friday that the economy grew at a sluggish 1.1 percent in the second quarter, slightly less than the previously reported 1.2 percent.

San Francisco Fed chief John Williams was largely sympathetic but said delaying rate hikes could lead to a recession in later years.

U.S. Treasuries slumped as investors evaluated whether the Fed is likely to raise rates in September. This is a sign that investors read her tone as hawkish. The 2-year is the most Fed sensitive part of the curve. After trading closed, Icahn said the reports were wrong and, in fact, he has bought more shares.

About the economy, Yellen repeated what she has said several times before. She said efforts need to be made, in particular, to boost the productivity of US workers.

During a highly anticipated speech in Jackson Hole, Wyoming, the Federal Reserve chairman hailed the strength of the world's biggest economy in the face of global headwinds.

Nearly a decade of ultra-low interest rates has helped propel stock prices to record highs, even as the economy expands at a lukewarm rate and US largecaps struggle with over a year of declining earnings.

"Our communities are being sacrificed for an inflation enemy that isn't here", said Rod Adams, a community organizer for Neighborhoods for Change in Minnesota.

Divergent views from Fed officials in recent weeks have kept markets guessing about the bank's intentions.

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