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| Federal Reserve hints at interest rate hike in December Federal Reserve hints at interest rate hike in December | |
| (25 days later) | |
| The Federal Reserve chairwoman, Janet Yellen, said interest rates could rise “relatively soon” in her first public comments since the election of Donald Trump as the next US president. | The Federal Reserve chairwoman, Janet Yellen, said interest rates could rise “relatively soon” in her first public comments since the election of Donald Trump as the next US president. |
| Yellen said Trump’s victory had caused no significant change in the outlook for US growth, and signaled that the US central bank could move to hike benchmark rates at its meeting next month. | Yellen said Trump’s victory had caused no significant change in the outlook for US growth, and signaled that the US central bank could move to hike benchmark rates at its meeting next month. |
| “The evidence we have seen since we met in November is consistent with our expectation of strengthening growth and improving labor markets and inflation moving up,” she said in testimony on Capitol Hill on Thursday. “I do think the economy is making very good progress toward our goals.” | “The evidence we have seen since we met in November is consistent with our expectation of strengthening growth and improving labor markets and inflation moving up,” she said in testimony on Capitol Hill on Thursday. “I do think the economy is making very good progress toward our goals.” |
| She said there was still “room to run” in the US recovery and it “could well become appropriate relatively soon”. Yellen said she favoured gradually increasing rates. | She said there was still “room to run” in the US recovery and it “could well become appropriate relatively soon”. Yellen said she favoured gradually increasing rates. |
| Yellen said the job market had “stepped up” and inflation, while still below the Fed’s 2% target, was picking up. The Fed has not raised its benchmark rate since last December, when it rose from near zero to the current level of 0.25-0.5% – the first interest rate rise in seven years. | Yellen said the job market had “stepped up” and inflation, while still below the Fed’s 2% target, was picking up. The Fed has not raised its benchmark rate since last December, when it rose from near zero to the current level of 0.25-0.5% – the first interest rate rise in seven years. |
| Yellen said she intended to see out her full term at helm of the Fed until January 2018, despite Trump repeatedly calling for her to leave the position early due to her hesitancy to raise rates, which he claims has been artificially slowing down the economic recovery. | Yellen said she intended to see out her full term at helm of the Fed until January 2018, despite Trump repeatedly calling for her to leave the position early due to her hesitancy to raise rates, which he claims has been artificially slowing down the economic recovery. |
| Trump has not addressed his concerns about Yellen since the election, but during the campaign he accused her of creating a “false economy” by keeping interest rates artificially low to help Barack Obama and the Democratic candidate, Hillary Clinton. | Trump has not addressed his concerns about Yellen since the election, but during the campaign he accused her of creating a “false economy” by keeping interest rates artificially low to help Barack Obama and the Democratic candidate, Hillary Clinton. |
| In September, Trump said Yellen “should be ashamed of herself”. “I used to hope that the Fed was independent,” he said in an interview with CNBC. “And the Fed is obviously not independent. It’s obviously not even close to being independent.” | In September, Trump said Yellen “should be ashamed of herself”. “I used to hope that the Fed was independent,” he said in an interview with CNBC. “And the Fed is obviously not independent. It’s obviously not even close to being independent.” |
| Before the election, economists had thought that a Trump victory would probably delay at rate rise. But since his victory the odds of a rate rise in December have shortened due to the “Trumpflation” rally in the stock market and his pledge for massive investment in America’s ageing infrastructure. | Before the election, economists had thought that a Trump victory would probably delay at rate rise. But since his victory the odds of a rate rise in December have shortened due to the “Trumpflation” rally in the stock market and his pledge for massive investment in America’s ageing infrastructure. |
| In her testimony, Yellen did not mention the economic impact of Trump’s spending plan or his promise of big tax cuts, but said the Fed’s models would be adjusted when it became clear exactly what the new administration has planned. “When there is greater clarity about the economic policies that might be put into effect, the [Federal Open Market Committee] will have to factor those assessments of their impact on employment and inflation and perhaps adjust our outlook,” she said. | In her testimony, Yellen did not mention the economic impact of Trump’s spending plan or his promise of big tax cuts, but said the Fed’s models would be adjusted when it became clear exactly what the new administration has planned. “When there is greater clarity about the economic policies that might be put into effect, the [Federal Open Market Committee] will have to factor those assessments of their impact on employment and inflation and perhaps adjust our outlook,” she said. |
| The pricing of federal fund futures contracts imply that there is a greater than 95% chance of the FOMC raising rates at its next meeting, on 13-14 December in Washington. | The pricing of federal fund futures contracts imply that there is a greater than 95% chance of the FOMC raising rates at its next meeting, on 13-14 December in Washington. |