US Federal Reserve chair Janet Yellen made waves in her most recent news conference when she said that US interest rates may begin to rise about six months after the central bank concludes its bond-purchasing programme. With the Fed expected to end quantitative easing (QE) this autumn, the rate hike would therefore begin in spring 2015.
Yellen’s comments follow an official statement from the Federal Open Market Committee (FOMC) in which it said it would wait “considerable time” after it ends it stimulus program before it raises the federal funds rate. When asked about how long that would actually be, Yellen said it was “hard to define, but, you know, it probably means something on the order of around six months or that type of thing.” However, Yellen said everything hinges on economic conditions.
The Dow Jones Industrial Average responded to Yellen’s remarks by falling from a high of 16,363.32 to 16,126.29. However, the Dow rebounded slightly, closing at 16,222.17.
The Fed said in December 2012 that it would not lower rates until the US unemployment rate dropped below 6.5%. With unemployment now sitting at 6.7%, markets have been attempting to gauge the Fed’s next moves. But Yellen indicated that rates could end up staying low even after unemployment falls below 6.5%. In addition to looking at how close inflation and unemployment are to its goals, the central bank will also review how fast it is approaching those goals, she said.
According to a Reuters poll, most top Wall Street economists do not project a US rate hike until the second half of 2016.
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