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« Where is the Gold Price Going? | Main | UK prime minister lays out her plans for a clean break from Europe »
Wednesday
Jan182017

YELLEN: The Fed is close to its goals and expects to hike rates 'a few' times this year

US Federal Reserve Board Chair Janet Yellen said the Fed is close to meeting its dual goals of full employment and price stability but can’t be precise about the timing of interest-rate hikes.

In a speech titled “The goals of monetary policy and how we pursue them,” Yellen said she and most of her colleagues expect to raise interest rates “a few” times this year.

Yellen spoke Wednesday at the Commonwealth Club in San Francisco.

“Now it’s fair to say the economy is near maximum employment and inflation is moving toward our goal,” Yellen said after recalling the damage of the 2008 financial crisis.

“Although inflation has been running below our 2% objective for quite some time, we have seen it start inching back toward 2% last year as the job market continued to improve and as the effects of a big drop in oil prices faded,” she said.

“Now it’s fair to say the economy is near maximum employment and inflation is moving toward our goal,” Yellen said after recalling the damage of the 2008 financial crisis.

“Although inflation has been running below our 2% objective for quite some time, we have seen it start inching back toward 2% last year as the job market continued to improve and as the effects of a big drop in oil prices faded,” she said.

Her speech comes to markets ahead of the main highlight of the week: President-elect Donald Trump’s inauguration and speech on Friday.

The president-elect gave few updates on his fiscal policy and infrastructure plans during a press conference last week, and any guidance on the economy will be parsed by market participants on Friday.

Minutes of the Fed’s most recent policy meeting in December showed that it’s closely monitoring how fiscal stimulus would affect economic growth and interest rate decisions.

Almost all members of the Federal Open Market Committee “indicated that the upside risks to their forecasts for economic growth had increased as a result of prospects for more expansionary fiscal policies in coming years,” the minutes said.

“We are of the view that the Fed hikes twice this year,” Neil Dutta, head of US economics at Renaissance Macro, said in a note. “Relative to our baseline, the risk clearly skews to three hikes in 2017 than one.”

Bonds deepened losses after Yellen’s speech was published. The two-year yield, which is sensitive to interest rate expectations, rose by four basis points, to 1.201%, at 3:06 p.m.

Here’s the full text of Yellen’s speech:

Seeing is believing and at the moment I dont...

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