Yellen: Case for Hike 'Strengthened'

Economic indicators show the case for raising the federal funds target rate has "strengthened" recently, but there is no preset course for hikes, Federal Reserve Board Chair Janet Yellen said Friday.

"Indeed, 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 funds rate has strengthened in recent months," she said. "Of course, our decisions always depend on the degree to which incoming data continues to confirm the Committee's outlook.

"And, as ever, the economic outlook is uncertain, and so monetary policy is not on a preset course," she said. "Our ability to predict how the federal funds rate will evolve over time is quite limited because monetary policy will need to respond to whatever disturbances may buffet the economy."

Speaking at the Jackson Hole, Wyo., summit, Yellen said economic expansion continues, "led by solid growth in household spending," according to prepared text of her speech, released by the Fed.

On the down side, "business investment remains soft and subdued foreign demand and the appreciation of the dollar since mid-2014 continue to restrain exports."

Although economic growth has been tepid, it has fueled labor market improvement, Yellen said.

But, inflation is still below the Fed's 2% target.

Anticipating moderate GDP growth to continue, labor markets to continue apace, and "inflation rising to 2 percent over the next few years, it will be appropriate to gradually raise the fed funds rate target."

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER