Monday, 20 February 2017

Federal Reserve hints at possible rise in US interest rates in December

Janet Yellen, Chair of the Federal Reserve. Janet Yellen, Chair of the Federal Reserve.

APPEARING before a Congressional Committee in the United States, on other matters, Janet Yellen, Chair of the Federal Reserve, indicated that a rise in US interest rates in December is ‘a live possibility’.

“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 labour market and to return inflation to our 2  per cent target over the medium term,” Yellen told the Financial Services Committee of the House of Representatives.

A meeting of the Federal Reserve’s policy committee in December is the next and final opportunity for any increase to take place this year after US interest rates have been near zero since December 2008.

Higher interest rates would make the dollar appear more attractive to investors so the heavily hinted possibility of a rise increases demand for the US currency and indeed the dollar strengthened on the news.

There is no absolute commitment at this stage and there is still a month in which to gather information about the state of the economy, but it does seem unlikely that she would have made this comment unless she was fairly certain that the increase was on the cards.

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