Penticton Herald

Yellen: Fed will likely raise rates this month

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WASHINGTON (AP) — Federal Reserve Chair Janet Yellen signalled Friday that the Fed will likely resume raising interest rates later this month to reflect a strengthen­ing job market and inflation edging toward the central bank’s 2 per cent target.

Yellen also said in a speech in Chicago that the Fed expects steady economic improvemen­t to justify additional rate increases. While not specifying how many rate hikes could occur this year, Yellen noted that Fed officials in December had estimated that there would be three in 2017.

Yellen’s signal of a likely rate hike this month reflects an encouragin­g conclusion by the Fed: That nearly eight years after the Great Recession ended, the U.S. economy has finally regained most of its health.

At a separate appearance Friday in New York, Vice Chair Stanley Fischer added his voice to a series of Fed officials who have indicated this week that they would likely favour raising rates at the Fed’s next meeting March 14-15. Asked whether there had been a conscious effort by Fed officials to signal a probable rate hike at that meeting, Fischer said, “If there has been a conscious effort, I’m about to join it.”

Many economists now say that barring an unexpected­ly disastrous monthly jobs report next Friday, a Fed rate increase this month appears certain.

“The Fed will hike unless next week’s payroll report is calamitous,” said Ian Shepherdso­n, chief economist at Pantheon Macroecono­mics. “That’s unlikely, so we expect rates to rise.”

At the March 14-15 meeting, Yellen said the Fed’s policymake­rs will “evaluate whether employment and inflation are continuing to evolve in line with our expectatio­ns, in which case a further adjustment of the federal funds rate would likely be appropriat­e.”

Friday’s remarks from Yellen and Fischer echoed those made earlier this week by several other Fed officials.

What has shifted the sentiment of most Fed officials decisively toward a rate increase has been a wave of robust economic data — notably on job growth, manufactur­ing and consumer confidence — along with surging stock prices. On Thursday, for example, the government reported that first-time applicatio­ns for unemployme­nt benefits — a proxy for the pace of layoffs — fell last week to their lowest level in nearly 44 years. The stock market has been setting a string of record highs, fueled by confidence that President Donald’s Trump’s plans for cutting taxes and boosting spending will win congressio­nal approval.

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