Fed Chair Janet Yellen Hints at Rate Hike in US Economy Outlook

“We are doing well”, Fed chair Janet Yellen said at the Economic Club of Washington.

Part of that bill would require the Fed to tether interest rates to a single formula, a proposal Yellen has said “deeply troubled” her.

Since unit labor costs are “the biggest input into production” in an economy like ours, Ashworth worries that inflation could rise faster than expected next year and prompt the Fed into a more aggressive policy tightening tempo.

Although the unemployment rate fell in October to a seven-year low of 5 percent, Yellen said she did not believe the labor market was at “full employment” yet.

Economists expect the base rate to be hiked by 25 basis points, and be the beginning of a slow cycle of policy tightening that will likely mean rates will be kept below previously normal levels for years to come.

Federal Reserve Chair Janet Yellen opened a Congressional committee hearing on the USA economy on Thursday with an upbeat assessment of where the country stands as the Fed marches towards its first interest rate hike in a decade.

Inflation data for October was announced on November 17, wherein the Consumer Price Index (CPI) was recorded at 0.2%.

Ms Yellen said on Wednesday she was “looking forward” to an interest rate rise that will be seen as a testament to the economy’s recovery from recession.

FXCM Israel research department said in its market review this morning, “The shekel-dollar exchange rate is rising above NIS 3.88/$ with two key events expected – the European Central Bank decision today and tomorrow’s U.S. employment figures”.

Yellen also sees the risks to the Fed’s outlook for economic activity and the labor market as very close to balanced.

Ryan Sweet, senior economist at Moody’s Analytics, said: “The employment report will give the Fed the confidence to begin raising rates in December”. She reiterated that the pace of subsequent increases was likely to be gradual, meaning that rates for consumer and business borrowers will remain favorable for a while.

The Fed’s job is already challenging, given the moves by other major central banks to continue easing financial conditions. “I think most currency traders were short the euro and long the dollar, expecting different commentary from chairman Draghi”, said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

Yellen had her own words for Congress, particularly members of the House of Representatives, which recently passed legislation challenging the independence of the Fed. The number of part-time workers who would prefer full-time jobs remains above its pre-recession level.

“It appears that the underlying rate of inflation in the United States has been running in the vicinity of 1½ [percent] to 1¾ percent”, Yellen said, once the core data are adjusted for downward pressure from low oil prices and a stronger dollar.