Yellen expects interest rate hike this year

The Federal Reserve Chair Janet Yellen said on Friday that she expected the Fed to raise interest rates at some point this year, underlying the fact that economic outlook remain highly uncertain.

Speaking in Cleveland, Yellen reaffirmed her view Friday that America’s central bank intends to raise its key interest rate this year for the first time since 2006.

At an estimated 680,000 shortfall relative to what its historical responsiveness to the economic cycle would imply, it is expected that, gap in part-time employment is negligible as far as its potential to influence overall labor market dynamics or the growth rate of wages.

“Before raising the rates we want to feel reasonably confident that inflation is going to move up”, Yellen said.

Yellen was cautious, however, citing concerns over the country’s labor market as well as other risks internationally.

“The market had deteriorated to the level where, at a 2.40 percent yield on 10-year notes, there was some pretty aggressive buying”, said Thomas Di Galoma, head of fixed income, rates and credit at ED&F Man Capital Markets in New York. Prices touched $1,146.75 on Wednesday, their lowest since March 18, when the dollar was boosted by weakness in the euro on Greece and the tumble in Chinese stock markets.

She also stressed that the move toward a tighter monetary policy would be gradual and that Fed policy would need to remain supportive of economic growth “for quite some time”.

She noted two specific drags on the USA economy: the strengthened dollar’s impact on exports and the decline in business investment linked to lower oil prices.

Yellen unexpectedly expressed the priority she places on the safety of the financial system during a question-and-answer session in an appearance in Cleveland, when she was asked to name what she thought was the biggest threat to America.

Fed policy makers in June forecast two quarter-point rate increases this year. That might signal that Yellen isn’t too anxious about any spillover into the American economy, or it may be something she was not yet prepared to talk about.

“The situation also calls for some sober reflecting on how best to preserve financial stability, in all parties’ interests”, Rosengren said. Sentiment started to improve Thursday as China’s stock market started stabilizing. “I think a significant number of individuals still are not seeking work because they perceive a lack of good job opportunities and that a stronger economy would draw some of them back into the labor force”.