According to the Chairman of the Federal Reserve, Janet Yellen, improvement in the labor market and expectations for moderate economic growth has helped strengthen US interest rates in recent months. But she did not give any indication that officials could tighten monetary policy as soon as possible. Instead, she just stressed as usual, that the Fed rate decision will depend on whether the freshest economic data continues to confirm its prospects. The Fed last raised interest rates was in Decembe 2015, the first increase in nearly a decade, but this policy has detained a further increase of slowing global growth, financial market volatility and US inflation data over this year. She also stressed that while inflation is still running below 2% of the Federal target, this happens because of some temporary factors that still affect it.
Speaking about the three-day international gathering of central bankers in Jackson Hole, Wyoming, Yellen said "the US economy is nearing the Federal Reserve’s statutory goals of maximum employment and price stability."
On the day of crucial trade, the pound ended down against the dollar after Stanley Fischer, vice chairman of the Fed, signaled that interest rates will probably go up two levels before the end of the year, This comment triggered selling US shares, even as he stressed that the increase would depend on economic performance.
Because of slower growth means US interest rates in the future would also likely need to be lower than average. Some analysts have predicted that the Fed will have little room to fight recession in the future because there will be little room to lower interest rates. Yellen regard this view as something that is exaggerated, because the Fed will be able to use the purchase and foward guidance to ease the condition. It may also want to explore other options, including expanding the range of assets that can be bought, raising the inflation target, or target nominal GDP, she said.
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