‘The Fed continues to expect that the evolution of the economy will warrant gradual increases in the federal funds rate over time.’ – Janet Yellen, US Federal Reserve
On Wednesday, the Chair of the US Federal Reserve Janet Yellen testified on the Semi-annual Monetary Policy Report before the House Financial Services Committee in Washington DC. In the prepared testimony, Yellen said that the country’s economy was strong enough for the central bank to continue to increase interest rates and start winding down its massive balance sheet as soon as this year. Furthermore, in what might appear to be her last public appearance before the Congress, the Fed Chair highlighted the fact that despite the economy expanding at a slowly (but steady) pace, it continued to add jobs and benefit from stable household consumption and business investment, while more favourable conditions overseas continued to support the domestic economy. Ms. Yellen also noted that in the wake of the current estimates, the federal funds rate might not even need to increase all that much further in order to reach the neutral level that would neither encourage nor discourage the economic activity at home.
