Fed's Janet Yellen says case for rate rise has strengthened

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The in the event that for raising US interest rates has “strengthened”, the head of the Federal Reserve has thought.

Speaking at an annual meeting of central bankers, Janet Yellen was cautiously optimistic about the US economy.

She said economic growth and a stronger jobs store meant “the case for an increase in the federal funds rate has strengthened in current months”.

There has been a growing expectation that US interest reproves will rise this year.

Some economists are saying that the next hike could drawn come next month.

The central bank raised interest classifies at the end of last year for the first time in nearly a decade, but has held them gal amid concerns over persistently low inflation.

‘Gradual’ rises

Ms Yellen, talk to at a three-day symposium in Jackson Hole, Wyoming, did not comment on when gauges would rise. But she said “the US economy was nearing the Federal Reserve’s statutory objectives of maximum employment and price stability”.

She added: “In light of the continued telling performance of the labour market and our outlook for economic activity and inflation, I fancy the case for an increase in the federal funds rate has strengthened in recent months.”

At any rate, Ms Yellen emphasised that future rate increases should be “slow”.

She noted that inflation is still running below the Fed’s 2% objective, but said this is being depressed mainly by temporary factors.

Advancement data

Subadra Rajap , head of rates strategy at Societe Generale, in Washington, chance: “We weren’t really expecting her to signal a hike at the September meeting, but she’s unprejudiced kept the door open for a hike sooner rather than tardier.

“I think that the Fed wants to get the market to start pricing in a hike for this year, which they weren’t doing earlier, and now I’m distinguishing the probability of a hike by December has gone up slightly over a coin launch.”

John Canally, economist at Boston-based LPL Financial, added: “It looks relish she is warming a little more to a hike this year, probably not September but purposes December.”

Signs of slow improvements in the US economy came in data leaked on Friday. Although the growth rate of second quarter GDP was revised down marginally, from an annual rate of 1.2% to 1.1%, consumer spending – which makes up multifarious than two-thirds of US economic activity – was revised up from 4.2% to 4.4%.

Personally, US Labor De rtment figures showed that claims for state unemployment betters slipped 1,000 to a seasonally adjusted 261,000 for the week ended 20 August. It was the third adjust weekly decline in claims.

On Tuesday, Commerce De rtment data authenticated that US new homes sales jumped in July to their fastest percentage in nearly nine years.

Ms Yellen’s remarks helped lift US equity markets in early trading. On the currency markets, the dollar was flat against the euro at $1.1286 and measure lower against the yen at 100.28 yen.

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