Yellen: Fed still on track to raise rates this year

Federal Reserve chairwoman Janet Yellen said she expects the Fed to raise interest rates by the end of the year during a speech to the City Club of Cleveland on Friday. On Greece, all Yellen said in her speech was that “the situation in Greece remains unresolved”.

Because there are some factors, which I mentioned earlier, that continue to restrain the economic expansion, I now anticipate that the appropriate pace of normalization will be gradual, and that monetary policy will need to be highly supportive of economic activity for quite some time. The unemployment rate dropped to 5.3 percent, but was largely due to a marked decline in the labor force participation rate, which is at its lowest level in about 37 years.

Euro zone finance ministers will meet on Saturday to decide on a third bailout for Greece, which made substantial concessions in its latest proposal to lenders, including tax hikes, in hopes of receiving $59 billion to help it cover debts until 2018. It would signal that the US economy is almost fully recovered from the depths of the Great Recession.

The predictions, he said, show “only modest” improvement in inflation and they assume some tightening in labor markets.

Yellen said she felt that initial step will have a small impact, and that the Fed would be raising rates only gradually from that point on.

“Puerto Rico is a huge problem for the U.S, if they were to go bankrupt, because it would disrupt the municipal bond market here”, said Peter Cardillo, chief market economist at Rockwell Global Capital.

Strong gains in Chinese equities for a second day after a barrage of emergency measures from Beijing calmed jitters about more stock losses worldwide and stoked selling in Treasuries, analysts said. In addition, she said the number of workers employed part time for economic reasons, which amounts to 4.5% of total employment, is “notably larger” than has been the case during previous expansions.

A Fed rate hike would be a big deal for America.

The Fed has kept its target for the federal funds rate at virtually zero since 2008 to bolster the economy.

Yellen is moving cautiously toward the first rate increase in nearly a decade as the economic expansion enters its seventh year and unemployment falls.

Physical demand remained tepid this week as prospective investors in China chased bargains in equities after a market selloff, while those in India delayed purchases.

Next week, Yellen will appear before public hearings of the House and Senate, and will deliver the Fed’s semiannual policy report.