The case for a United States interest rate hike has certainly become more probable in the last few months because of the efficiency of the labor market as well as predictions for positive economic growth, according to Federal Reserve Chair Janet Yellen. Yellen did not state when the United States central bank might raise interest rates, however, her comments indicated the view that such a move might come before the end of 2016. The Federal Reserve has policy meetings scheduled in September, November and December.
Giving a speech at a three-day international gathering of central bankers as well as academics in Jackson Hole, Wyoming, Yellen stated that “U.S. economy was nearing the Federal Reserve’s statutory goals of maximum employment and price stability.” Data released earlier on Friday, though, indicated that the economy was slower than initially thought during the second quarter, with gross domestic product growing at a 1.1% annual rate. At the same time, consumer spending, which makes up more than sixty-seven percent of economic activity, increased at the most rapid rate in the fourth quarter of 2014. Yellen referred to a recent rally in employment and stated the Fed projects the economy to continue growing.
“In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal fund’s rate has strengthened in recent months,” said Yellen, adding that the Federal Reserve still believes that future rate increases should be “gradual.”
The Fed raised rates in December for the first time in almost ten years. However it has held off further growth so far this year because of a global growth slowdown, financial market volatility, and generally tepid U.S. inflation data. Another impact has been Britain’s decision to leave the European Union.