Chair Yellen Recapitulates That the Fed Hike Does not Have Fixed Timetable

The Federal Reserve does not have a “fixed timetable” for removing the current accommodative stance, central bank Chair Janet Yellen told Congress on Wednesday.

Still, many of her Fed colleagues indicated in their recent projections that it would be appropriate to remove some of that accommodation this year if no significant new risks arise, she added.

Stocks declined slightly while Yellen was testifying.

Yellen’s testimony follows the Federal Reserve’s decision last week to hold steady on the federal funds rate at 0.25 percent to 0.5 percent.

Eventually, she said, continued job creation at the pace it has been running would cause the economy to overheat. If this happens, the Fed could be forced to raise rates faster than policymakers would like to, she added.

Yellen was speaking as part of her semiannual testimony before the House Financial Services Committee about financial regulation. Investors have been watching Yellen’s comments closely for clues about any potential changes to the timing of the next rate hike. The Fed raised rates last December for the first time in nearly a decade but has held firm since then.

At her news conference following last weeks decision, Yellen said she “would expect to see (a rate increase this year) if we continue on the current course of labor market improvement, and there are no major risks that develop and we stay on the current course.”

In the closely watched dot plot, Fed members forecast a median federal funds rate of 0.6 percent, indicating another hike would be in the cards before year end.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza