US Fed chair Janet Yellen has reaffirmed future rate hikes in her last remarks before a policy meeting next week, saying upbeat economic factors made up for more negative trends – but she’s vague on the timing.
The chairperson of the US central banking authority said that “positive forces” outweighed the more sobering developments, including a disappointing jobs report released Friday that saw only 38,000 jobs created in May – well below estimates and the worst in six years in terms of monthly jobs creation.
While she said the jobs report was “concerning” and “disappointing”, she also downplayed the significance of what to her was a “single monthly report” that’s emerged following months of healthier employment figures.
“Our views on policy respond to incoming data, such as a surprise like the labor market report last Friday, only to the extent that we determine or come to the view that the data is meaningful in terms of changing our view of medium- and longer-term economic outlook,” Yellen said in her remarks at the World Affairs Council of Philadelphia.
While her speech was largely positive, she enumerated four risks to the US economy that would potentially impact the scheduling of a rate raise – slower demand and productivity, and inflation and overseas risks from a slowing global economy.
As such, Yellen refrained from providing a solid indication of when rates would be raised, saying that they should come gradually, a step away from her May 27 remarks where she said that a rate hike would be justifiable “in the coming months.”
Analysts said Yellen’s speech was largely in line with expectations. “Going into the talk, there was a feeling this would be extremely dovish. It’s dovish but not extremely dovish,” said Bucky Hellwig, senior vice president at BB&T Wealth Management, in Birmingham, Alabama. “I think she’s still committed to rate hikes, but she is emphasizing there’s not a timetable. She didn’t say ‘in the next few months,’ which is dovish.”
Still her overall tone remained optimistic, saying she expected “economic expansion to continue, with the labor market improving further and GDP growing moderately.”
But beyond her relative confidence in continued economic development at home, she had cautioning words for Britain, which is weeks ahead from a referendum on whether to stay in the European Union. “A UK vote to exit the European Union could have significant economic repercussions,” she said.
jd/uhe (Reuters, AP, AFP)