Fed chief Janet Yellen warns of risks to job growth

Federal Reserve Chair Janet Yellen said the us economy faces a number of global threats that could hamper growth and compel the Fed to slow the pace of future interest rate hikes.

Yellen agreed the black unemployment rate is too high but said it is not a specific metric the Fed’s committee discusses when it considers raising interest rates.

She highlighted in her semiannual report to Congress the widening fallout from concerns over China’s weaker currency and economic outlook, which is rattling financial markets around the world.

— Said the Fed still expects to raise rates gradually but is not on any preset course.

The US Federal Reserve chair said the bank will examine the possibility of negative interest rates, but further rate rises are more likely than cuts.

She appeared to accomplish the task: The Dow Jones industrial average and other major stock indexes rose after her comments, although they lost most of those gains by the time the markets closed.

How is the fall in oil prices playing economically speaking?

“It seems she succeeded in calming a very jittery market, but there’s no guarantee this lesser anxiety will last”, he said.

Yellen’s valuation directs Fed policymakers are acutely mindful of the potential impact of latest global economic and market turmoil could have on the economy. But a stronger euro makes it even harder for the European Central Bank to hit its inflation target of just under 2 per cent, because it cuts the price of imported goods.

They were her first since the news conference that followed the Fed’s December rate hike, allowing her to take stock of several weeks in which concerns have grown about slowing USA growth, a continued collapse in oil markets, a downturn in US equities – and more than one suggestion that the Fed’s December move was a mistake.

“Low commodity prices could trigger financial stresses in commodity-exporting economies” as well as in commodity-producing firms around the world, she said.

US stocks have struggled since the start of the year amid mounting worries over a slowdown in global and USA economic growth.

Analysts had anticipated the first such hike would be in March.

U.S. Federal Reserve chairwoman Janet Yellen on Wednesday signals that the Fed still keeps door open to further interest rate hikes, but flagging risks that could delay any further moves.

In 2010, with the recovery faltering, the Fed considered adopting negative rates but decided against it. Then-Fed Chairman Ben Bernanke said subsequently that he had been concerned about what negative rates would do to money-markets funds.

“Other measures of labor market conditions have also shown solid improvement”, Yellen said Wednesday. “Against this backdrop, the Committee expects that with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in coming years and that labour market indicators will continue to strengthen”, Yellen said.

Hensarling continued, “Now I will not use this hearing to either praise or condemn the Fed’s decision to raise rates by 25 basis points interest rates in December”. “The benefit of a rule-based system is it’s systematic and understandable”, Yellen said.

Neugebauer proceeded to question whether regulatory authority granted to the Fed by the Dodd-Frank Wall Street Reform and Consumer Protection Act has “stymied the ability of this economy to grow” and amounts to simply “micromanaging financial markets”.