Fed Chair Yellen Remains Committed to Raising Rates

Federal Reserve Chair Janet Yellen said the central bank is concerned with growth get out of hand and thus is committed to continuing to raise rates in a gradual manner.

“We don’t want to cause a boom-bust condition in the economy,” Yellen told Congress in her semiannual testimony Wednesday.

While Yellen did not specifically commit to a December rate hike, her comments indicated that her views have not changed with her desire for the central bank to continue normalizing policy after years of historically high accommodation.

Markets widely expect a move next month but are not on the same page with the Fed when it comes to 2018. Current fed funds futures trading indicate only one or two hikes expected for next year, while the Fed has penciled in three for the year ahead.

“We are not seeing undue inflationary pressure in the labor market, so our policy remains accommodative,” Yellen said. “But we do think it’s important to gradually move our policy rate toward what I’ll call a neutral level, which would be consistent with sustainably strong labor market conditions,” she said.

The Fed currently targets its benchmark rate between 1 percent and 1.25 percent. Yellen’s successor, Jerome Powell, told a separate congressional panel Tuesday that he sees the longer-run rate around 2.5 percent.

Yellen said the Fed does not want to stifle growth but feels strongly about keeping consistent with a labor market that is nearing full employment.

“We want to do this gradually, because if we allow the economy to overheat, we could be faced with a situation where we might have to … raise rates and throw the economy into recession,” she said. “We don’t want to cause a boom-bust condition in the economy.”

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