United States Federal Reserve Chairwoman Janet Yellen has dropped poignant hints for a likely hike in the US central bank’s benchmark interest rate, ahead of a scheduled December monetary policy decision.
Strong economic data issued Thursday by the federal government supported her view of the strengthening US economy, reported DPA, the German news agency.
In testimony to a congressional committee, Yellen said that the Fed’s monetary policy committee expects that “an increase could well become appropriate relatively soon.”
In a November 2 statement after its latest meeting, the Fed left the key interest rate in a range of 0.25 to 0.5 per cent. The target has been unchanged since December 2015, when the Fed hiked rates from an unprecedented near-zero range set during the 2008 financial crisis.
Yellen told Congress that monetary policy is likely to be tightened “if incoming data provide some further evidence of continued progress” towards the Fed’s objectives of full employment and 2-per-cent inflation.
Unemployment has been around 5 per cent for more than a year, and signs of pricing pressures in the US economy are rising, though inflation remains below the Fed’s goal.
The Fed is due to issue a statement on monetary policy on December 14.
“I do think that the economy is making very good progress toward our goals,” Yellen said.
Consumer prices in the United States rose in October at the fastest pace in more than six months, the Bureau of Labour Statistics said.
The consumer price index jumped by a seasonally adjusted 0.4 per cent, driven largely by an increase of 3.5 per cent in energy costs including a 7-per-cent jump in petrol prices. For the last 12 months, the US inflation rate is up 1.6 per cent.
Excluding volatile food and energy, so-called core prices rose a seasonally adjusted 0.1 per cent last month. Core inflation is 2.1 per cent for the last 12 months.
Fed policy makers prefer to gauge inflation based on a measure of consumer spending, over the survey-based consumer price index. The personal consumption expenditures index has been below the Fed’s 2-per-cent goal since April 2012.
New claims for unemployment compensation dropped last week to a 43-year low, the Labour Department said.
The number of people filing new claims for unemployment benefits fell by 19,000 last week to a seasonally adjusted 235,000, the lowest weekly mark since November 1973, the government says.
Weekly initial claims have been below 300,000 for 89 consecutive weeks, the longest stretch of such low job loss rates since 1970.
The rate of new home construction last month reached the fastest pace since the 2007 crash in the US housing market, the Census Bureau said.
Residential housing starts jumped 25.5 per cent from September to an annualized rate of 1.323 million last month, the highest rate in more than nine years. Construction of single-family houses was up 10.7 per cent, while multifamily flats surged by 68.8 per cent, the bureau said.
Yellen noted that failure to gradually tighten monetary policy as the economy heats up could lead instead to sharper interest rate hikes, which would risk an economic downturn.
“The committee must remain forward-looking in setting monetary policy,” she said.
Yellen, whose appointment concludes at the end of January 2018, told legislators that she intended to complete her four-year term as Fed chairwoman.
US president-elect Donald Trump harshly criticized the Fed and Yellen personally during his campaign. He could one day name a successor with Senate consent – and seems unlikely to reappoint Yellen – but has no power to force Yellen to step down early from the quasi-independent central bank.