Yellen ‘Looking Forward’ To US Rate Rise

“Such an abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession”, she said. Doing so would, in turn, raise the risk of upsetting financial markets and pushing the economy into recession.

During a speech in Washington Wednesday, U.S. Fed Chair Yellen indicated that conditions in the world’s largest economy were now suitable for central bank to raise rates this month. Rising rates tend to weigh on gold, as they lift the opportunity cost of holding non-interest paying assets.

Yellen said the labor market had “improved appreciably” and predicted that transient factors that have dampened prices will dissipate in 2016, bringing inflation back to the Fed’s desired 2 percent threshold – a level that has proved elusive for more than 40 straight months. That is a theme Ms. Yellen might emphasize in her testimony.

“Labour markets continued to tighten modestly”, the report said, reiterating limited wage pressures except for skilled occupations and for workers that were in short supply. 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 Labor Department’s gauge of average hourly earnings has shown early signs of picking up, with 2.5 percent year-over-year growth in October, the highest since 2009. Today from 09:45 to 10:00 CET final readings of November Services and Composite PMIs for France, Germany and euro-zone will be released.

Asian stock markets ended mixed yesterday hours ahead of the European Central Bank policy meeting and after Wall Street slipped 0.9 per cent overnight following Ms Yellen’s remarks. Heading into Friday’s USA nonfarm payroll report, the consensus estimate is for a 200,000 job gain.

The process of moving the interest rate up to a more normal level will take place slowly, she said.

The federal funds rate, a key short-term benchmark, has been near zero since December 2008 in an attempt to boost economic growth during the Great Recession and its aftermath.

According to the Federal Reserve, “economic activity increased at a modest pace in most regions of the country” from October to November, indicating that the Fed sees enough data points to justify raising interest rates.

“Absent information that drastically changes the economic picture and outlook, I feel the case for liftoff is compelling”, Lockhart said Wednesday in Fort Lauderdale, Fla.

Yellen had her own words for Congress, particularly members of the House of Representatives, which recently passed legislation challenging the independence of the Fed.