BEIJING, Feb. 25 (Xinhuanet) -- US Federal Reserve Chair Janet Yellen is preparing global markets for a much anticipated rise in US interest rates, the first in more than six years.
Yellen's remarks on Tuesday before the Senate Banking Committee were viewed by Fed watchers as a roadmap for hiking rates sometime in the coming months..... as long as the US economy continues to chug along nicely. But there are a couple of reasons why it's also a bit tricky for Yellen.
As head of America's central bank, Janet Yellen has clearly expressed her distaste for political pressure on monetary policy decisions. That's not stopped some of members of the Senate Banking Committee from dispensing their advice
"Madam Chairman, I know you and I disagree on this, but I would just suggest that the crisis is clearly long over, and I think the time for normalization is well overdue," Republican Senator Pat Toomey said. In her testimony to Congress, Yellen IS shifting toward "normalization."
With the strengthening economy, she thinks an interest rate rise will occur sometime after the Federal Open Market Committee takes the word "patient" out of its forward guidance language.
"The modification should be understood as reflecting the Committee's judgement that conditions have improved to the point where it will soon be the case that a change in the target range could be warranted at any meeting," Yellen said.
Despite an upbeat view of the labor market and dropping unemployment, Yellen still has concerns about slow wage growth and the quality of jobs being created.
Inflation is another complicating factor. It remains low for the Fed, though Yellen thinks this may be a short term impact from the recent low oil prices.
And despite signs of a slowdown in China and Europe, Yellen thinks the impact of cheap energy and stimulative monetary policies from other central banks could mitigate those global risks.
So if the American economy continues to power forward - and if inflation begins to pick up as Yellen expects - then a rate rise this year is a strong probability provided the Fed can be patient.
(Source: CNTV.com)
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