Home / Janet Yellen signals confidence in economy ahead of Fed rate decision
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Janet Yellen signals confidence in economy ahead of Fed rate decision

Federal Reserve Chair Janet Yellen says recent improvements in wages and the labour market are positive signs, boding well for a December rate hike.

Federal Reserve Chair Janet Yellen said she is increasingly confident that the economy is growing sufficiently to achieve labour-market improvement and higher inflation, laying the groundwork for a December interest-rate increase if data hold up.

“On balance, economic and financial information received since our October meeting has been consistent with our expectations of continued improvement in the labour market,” Yellen told the Economic Club of Washington on Wednesday, according to a text of her prepared remarks. “And, as I have noted, continuing improvement in the labour market helps strengthen confidence that inflation will move back to our 2 per cent objective over the medium term.”

The policy-setting Federal Open Market Committee meets in Washington Dec. 15-16 and is widely expected to raise interest rates, which have been held near zero since 2008. Fed officials have been trying to gauge whether the economy is headed toward their goals and can sustain growth as rates increase, making Yellen’s comments a positive sign that the Fed is on track for a potential increase.

Congressional Testimony

Yellen will also testify Thursday before Congress’s Joint Economic Committee.

Yellen on Wednesday emphasized that policy makers will receive a range of data on the labour market, inflation and economic activity between now and the December meeting that will influence their decision. Still, she pointed to recent improvements in the labour market and wages as positive signs.

“We have seen a welcome pickup in the growth rate of average hourly earnings for all employees and of compensation per hour in the business sector,” she said. “While it is too soon to conclude whether these more rapid rates of increase will continue, a sustained pickup would likely signal a diminution of labour market slack.”

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