Agencies
Washington May 27: Federal Reserve Chair Janet Yellen said Saturday that given the pace of US economic growth, a Fed decision to increase interest rates could be on the cards soon. Speaking at Harvard University, Yellen said she believed growth and the strengthening of the labor market would continue, and in that case, “probably in the coming months such a move would be appropriate.” That timeframe, which other Fed policymakers have also referred to in recent weeks, would put the Fed’s action at its June 14-15 or July 26-27 meeting.
“The economy is continuing to improve,” Yellen confirmed. “Growth looks to be picking up.” Yellen’s comments sent Wall Street stocks tumbling and the dollar higher. Since December, when the benchmark federal funds short-term rate was raised for the first time in more than nine years, to 0.25-0.50 per cent, the Federal Open Market Committee has demurred from more hikes as the economy went through a rough patch. Economic growth in the first quarter was a paltry 0.8 per cent annual pace, but current official and private sector forecasts point to 2.5-3.0 per cent growth for the current quarter.
Meanwhile, minutes from the Fed’s April 26-27 policy meeting, published last week, showed most of its policymakers considered it appropriate to raise rates in June if data continued to point to an improvement in second-quarter growth. The Fed raised its benchmark overnight interest rate in December for the first time in nearly a decade.
