U.S. Federal Reserve Chair Janet Yellen indicated, Nov. 17, an increase in interest rate “relatively soon” if the American economy continues to show sign of improvement, writes Lalit K. Jha. – @siliconeer #siliconeer #USFederalReserve #InterestRate #HomeLoans #Mortgage
“U.S. economic growth appears to have picked up from its subdued pace earlier this year. After rising at an annual rate of just 1% in the first half of this year, inflation-adjusted gross domestic product is estimated to have increased nearly 3% in the third quarter,” Yellen said in her testimony before the Joint Congressional Economic Committee.
The Federal Reserve, she said, expects economic growth to continue at a moderate pace sufficient to generate some further strengthening in labor market conditions and a return of inflation to the Committee’s 2% objective over the next couple of years.
“This judgment reflects my view that monetary policy remains moderately accommodative and that ongoing job gains, along with low oil prices, should continue to support household purchasing power and therefore consumer spending,” she said.
“In addition, global economic growth should firm, supported by accommodative monetary policies abroad. As the labor market strengthens further and the transitory influences holding down inflation fade, I expect inflation to rise to two percent,” Yellen said.
Commenting on the implications of recent economic developments and the economic outlook for monetary policy, Yellen said the stance of monetary policy has supported improvement in the labor market this year, along with a return of inflation toward the FOMC’s 2 per cent objective.
In September, the Federal Reserve decided to maintain the target range for the federal funds rate at ¼ to ½ per cent and stated that, while the case for an increase in the target range had strengthened, it would, for the time being, wait for further evidence of continued progress toward its objectives.
“At our meeting earlier this month, the (Federal Open Market) Committee (FOMC) judged that the case for an increase in the target range had continued to strengthen and that such an increase could well become appropriate relatively soon if incoming data provide some further evidence of continued progress toward the Committee’s objectives,” Yellen said.
“This judgment recognized that progress in the labor market has continued and that economic activity has picked up from the modest pace seen in the first half of this year. And inflation, while still below the Committee’s 2% objective, has increased somewhat since earlier this year.
Furthermore, the Committee judged that near-term risks to the outlook were roughly balanced,” she said.
Yellen said the U.S. economy has made further progress this year toward the Federal Reserve’s dual-mandate objectives of maximum employment and price stability.