Case For US Rate Rise Strengthening – Yellen

In a speech at the central bank’s annual Jackson Hole Summit, Yellen did not indicate when the central bank would raise rates but pointed at increases in the horizon.

While it is common for a central bank to adjust its monetary policies according to the realities of the domestic economy, the Fed must take a step further by evaluating possible spillovers from any of its decisions, given the status of the dollar as the primary global currency.

Moreover, Ms. Yellen made it clear in her speech that the Fed was “not actively considering” alternative policy measures for future to handle any crises.

Still, she said, “future policymakers might choose to consider some additional tools that have been employed by other central banks”, including buying a wider range of assets or raising the inflation target.

But it also means foreign goods imported to Britain become more expensive, driving up inflation.

U.S. government bond yields rose last Friday after comments from Federal Reserve officials revived bets that United States interest rates will rise this year. Belisle said the majority of investors expecting a raise in the rate before the end of the year.

“Yellen wants to set the table for a September hike, but perhaps only deliver the hike in November or December”, said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management, in Menomonee Falls, Wisconsin.

“Now, none of that is locked in in my thinking”.

So, it seems that the Fed feels it isn’t entirely confident about the economy … and visa versa. “I don’t think we’re behind the curve in terms of either inflation or even risking a big financial instability event”.

Robert Kaplan, president of the Federal Reserve Bank of Dallas, gave a slightly different assessment in his own Friday interview with Bloomberg. Fed vice-chairman Stanley Fischer, played the bad cop and said rate-increase was a possibility in September.

“There are reasons to have rates this low, but the cost is it hurts savers. There’s no question”, he said. The only downside I see is that there are only three meetings left this year and time is running out. The FOMC is still likely to be comfortable with a further shift to at least a 50% chance for September over the next week.

The FTSE 100 index turned higher.

The Dow Jones slipped by 53.01 points, or 0.3 percent to conclude trading at 18,396.4 points, while the S&P 500 similarly slipped by 3.43 points or 0.2 percent to end trading at 2,169.04 points.

In the week ahead, investors will focus on US economic reports to gauge if the world’s largest economy is strong enough to withstand a hike in interest rates in the coming months, with Friday’s nonfarm payrolls data in the spotlight.

Mihir Vora, director and chief investment officer, Max Life Insurance, pointed out that Yellen’s statements reiterated the Fed’s belief that the U.S. economy is on its way to stable growth, low unemployment and moving closer to the inflation target of 2%. Without naming Congress specifically, they both indicated lawmakers on Capitol Hill could be doing more to help the country along.