The United States Federal Reserve Chair Janet Yellen hinted at a policy rate hike in the coming months, as long as the economy continues to move on track, in sync with the market expectation.
Yellen hinted at a rate hike either in June or July, that too if the forthcoming data this week turns to be positive.
Non-farm payrolls and manufacturing ISM data, due this week will determine the path for an early rate hike, as long as the figures turn out to be strong.
Although Yellen tried to calm markets by pointing at a less steep rate hike, she sounded more confident on a rate hike in her speech than ever before, reiterating that the US economy has recovered quite a lot in the recent past from a weak winter, reports confirmed. She also expressed hope over achieving the two percent targeted inflation rate soon.
“It's appropriate … for the Fed to gradually and cautiously increase our overnight interest rate over time, and probably in the coming months such a move would be appropriate,” said Janet Yellen during a speech at Harvard University.
According to remarks by the CME Group, the probability of a Fed rate hike has increased to 34 percent from 30 percent prior to Yellen’s speech, Reuters reported.
In recent weeks, several Fed policymakers have reacted to stronger US economic data including that on housing and retail sales by putting a rate hike squarely on the table for either June or July. Earlier on Friday, the government revised higher its first-quarter GDP growth estimate to 0.8 percent, from 0.5 percent.
However, weak global oil prices and a strong dollar have kept the country’s inflation below the central bank’s target rate. The Fed Chair mentioned that the economy has not seen much improvement in wage growth which is suggestive of some slack in the labor market. Meanwhile, she is scheduled to make a public appearance on June 6 in Philadelphia, just a week prior to the next policy session.
The material has been provided by InstaForex Company – www.instaforex.com