Wednesday, Oct 27, 2021
International Finance
Economy

US interest rate hike could come sooner than later?

Fed Chair Janet Yellen says the economy is almost at full employment and inflation is moving in the direction of the Fed’s goal

January 20, 2017: According to Federal Reserve Chair Janet Yellen, the US economy is almost at full employment and inflation is moving in the direction of the Fed’s goal.

The good performance has led to speculation of a further rate hike.

The Federal Reserve had raised interest rates in December. The hike was the second time interest rates were hiked since the 2007-2009 financial crisis.

“Waiting too long to begin moving toward the neutral rate could risk a nasty surprise down the road — either too much inflation, financial instability, or both,” Yellen told the Commonwealth Club of California in San Francisco.

“In that scenario, we could be forced to raise interest rates rapidly, which in turn could push the economy into a new recession.”

Benchmark US Treasury yields rose and the dollar strengthened after the remarks. Yellen said asset valuations, including stock prices in part, reflect expectations that the Fed will normalise rates faster than other central banks.

JP Morgan Chase & Co. Chief Executive Officer Jamie Dimon has predicted that interest rates will rise along with a growing US economy. “I believe America is doing better than people think and therefore interest rates are probably going to be stronger than people think,” Dimon told health investors and executives at the JP Morgan Healthcare Conference in San Francisco.

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