Fed Chair Janet Yellen says case for rate hike has ‘strengthened’

From The Washington Post:

JACKSON HOLE, Wyo. — Federal Reserve Chair Janet Yellen on Friday signaled that the central bank is moving closer to raising its influential interest rate amid sustained improvement in the job market.

In a speech at an economics conference here, she acknowledged that the recovery’s momentum remains tepid. Still, the country has added an average of 190,000 jobs a month this summer, and the unemployment rate has remained steady at about 5 percent.

“I believe the case for an increase in the federal funds rate has strengthened in recent months,” Yellen told the audience at the annual symposium hosted by the Kansas City Fed.

However, Yellen emphasized that no decisions had been made and that any forecast is inherently uncertain. Over the past year, central bank officials have watched warily as global financial markets swung wildly over fears of a slowdown in China and Britain’s decision to leave the European Union. The turbulence overseas, coupled with surprisingly weak readings of the recovery at home, has kept the Fed from raising rates this year despite initially anticipating hiking as many as four times.

The possibility of an upcoming rate hike spooked Wall Street, at least temporarily. The major U.S. stock indexes dropped upon the release of Yellen’s prepared remarks but quickly reversed course. Each of the indexes were up more than half a percentage point in morning trading.

Meanwhile, the Fed is wrestling with more existential questions about the economy, including whether the slow growth that has dogged the recovery for the past seven years is here to stay. That would leave the economy more vulnerable to downturns and could limit the ability of policymakers to counteract them.

Yellen said the central bank’s own range …

Continue Reading