(Boursier.com) – Janet Yellen, president of the Fed, spoke Friday about the economic outlook in the United States. According to Yellen, the US economy should be strengthened well after a weak first quarter … A first increase in the federal funds rate this year would therefore plausible, if one believes the intervention of Yellen in Providence, Rhode Island.
The Fed ready to unsheathe
The ruling of the US central bank considers the US economy “well positioned” and expects a moderate expansion, taking into account factors opponents such as weakness in the energy sector, the limited level of business investment, or the slow improvement in the property market. Despite these factors, it would seem that the Fed is ready to tighten somewhat its policy rate this year, even if the future economic developments remain crucial …
Normalize last monetary policy
“If the economy continues to improve as I anticipate, I think it will be appropriate at some stage this year to take the initial measure to raise the federal funds rate and start the process of normalization of monetary policy, “said Yellen, who, however, qualified his statement by insisting that future action on rates will probably be” gradual “. Janet Yellen also think it will take several years before monetary policy is normalized.
Avoid overheating
Yellen also notes that the labor market is approaching the The objective in the United States, although “we are not there yet.” The US economy should recover it as a moderate rate of growth. The Fed could consider more strongly toughen its policy rate if the US economy accelerated more than expected, which is very hypothetical of course … But push the first rate hike until the employment and inflation are fully aligned with the objectives of the Fed “would run the risk of an overheating economy,” said Yellen.
Remember that the Fed rate remained almost to zero during a unique time period of almost seven years (since December 2008), and the last rise in Bank rate of 2006!
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