Yellen Expects 2015 Rate Hike
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Federal Reserve Chair Janet Yellen on Thursday reiterated that she expects 2015 to be the year of the rate hike during a speech at the University of Massachusetts’ Amherst campus.
“Most of my colleagues and I anticipate that it will likely be appropriate to raise the target range for the federal funds rate sometime later this year and to continue boosting short-term rates at a gradual pace thereafter, as the labor market improves further and inflation moves back to our 2 percent objective,” Yellen said Thursday.
The speech focused primarily on America’s decades-long battle with inflation, and Yellen, as expected, didn’t give any major secrets away.
What It Means:
“Whether interpreted as a dovish or hawkish speech yesterday, the takeaway remains the same,” Lindsey Piegza, chief economist at Stifel Fixed Income, wrote in a research note Friday. “The expectation of a rate increase still this year is based on model projections of growth and recovery in the economy, and individual committee members’ expectations.”
Piegza notes that there’s a difference between expectations and actual economic performance, so a 2015 rate hike is hardly a lock. Only 13 of the 17 participating members of the Federal Open Market Committee said they expect a rate increase to come in 2015, down from 15 who said the same in June.
The majority clearly favors normalizing monetary policy, but concerns about global economic health undoubtedly linger. Regardless, Yellen has made it clear that if all goes according to plan, liftoff will likely be achieved at some point before year’s end. Most economists are betting on the FOMC’s December meeting as the most likely launch date.