Federal Reserve Chair Janet Yellen said Tuesday that the US labour market still showed cyclical weakness and inflation continued to fall, making any interest rate hike unlikely before June. In testimony in Congress, Yellen also said that frailties in China and Europe continued to pose a risk for the US economy, supporting the need for keeping the extraordinarily loose monetary policy currently in place.
But she said that generally the US economy continued to grow fast enough to bring down unemployment, and the Fed expected that inflation would return back to normal over the medium term. That leaves the Fed still on course to begin normalising monetary policy later this year after keeping its base interest rate at the zero level for more than six years. In prepared testimony on monetary policy to the Senate Banking Committee, Yellen reiterated that policymakers will remain patient before tightening policy.
She said the Federal Open Market Committee, the Feed''s policy board, still "considers it unlikely" that it will need to hike the federal funds rate "for at least the next couple of meetings." Inflation is still falling, she said, and "room for sustainable improvements in labour market conditions still remains." The FOMC calendar has upcoming meetings in mid-March and late-April, leaving the earliest time for a hike on the calendar Yellen sketched out the June 16-17 meeting. With unemployment now having dropped to 5.7 percent on a strong pace of job creation since the middle of last year, the Feed''s focus is on inflation.
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