Fed: Yellen begins with caution normalization of politics … – Les Echos

The labor market situation will signal the change, believes the Fed, which gives a more balanced view of the US economy.

The Federal Reserve took time Wednesday to prepare a turning point in its monetary policy, but-as the kinematic effect in “slow motion”. If the monetary policy committee felt it no longer has to “be patient before normalizing monetary policy”, he insists that “economic growth has been somewhat more moderate.” In short: the signal is given to indicate that interest rates will be raised gradually, while stressing that the indicators are not green. “After the patience, the Fed is cautious,” said Wednesday, Bill Gross, Janus Capital Group.

When will the central bank left rates unchanged yesterday, between 0% and 0.25%? In its press release it says that labor market indicators are not yet at the level that corresponds to its mandate. Similarly, inflation will still remain low in the short term, even if it must go back to medium term due to the improvement in the labor market and the late effects of cheap energy. Finally, it will be vigilant on international events and financial movements.

“It is not because we removed the patient’s word that we will become impatient,” said Wednesday, Janet Yellen. “There is room for improvement in the labor market,” such-emphasized. In addition, households do not consume enough and exports are not efficient because of a too strong dollar.

The rates recorded probably from summer

The interest rates will be raised gradually, probably from the summer, “depending on how the economy will evolve,” said the president of the Fed. “We have not decided. it does not necessarily happen in June, although we can not exclude it. ” This would mark the first increase in a decade. Economists are divided on the issue and bet at the earliest on the Monetary Policy Committee in June, or the one in September. Everything will depend on the trajectory of inflation. In late January, the price index stood at 0.2% annualized, far from the 2% target of the central bank. If inflation remains low, but that economic forecasts are optimistic in the medium term, the central bank will feel free to act on interest rates. But she has time, especially that despite the good health of the labor market, wages are starting to rebound, which helps maintain low inflation in an environment marked by falling prices of energy. On Wednesday, the OECD said in a report that it would be “reasonable” that the Fed “wait longer before raising rates so as to further support private demand.”

It will take a lot of skill to Janet Yellen to defeat Arsenal in place by his predecessor Ben Bernanke, in 2008, without creating too violent turbulence and volatility in the markets . “The danger is that the vulnerabilities that accumulate during the period of highly accommodative monetary policy could be suddenly when there is a reversal of that policy, creating significant volatility of the market,” explained his side Christine Lagarde, IMF Managing Director, visiting India.