NEW YORK
Janet Yellen has made it clear that “probably a rise in interest rates in the coming months would be appropriate.” Because “if the economy and the labor market will continue to improve” is correct for the Fed to intervene in a “cautious and gradual” with an increase in the cost of money.
Yellen, speaking at Harvard University, has avoided excessive offer certainty to the markets or tie the hands of the Central Bank: a tight monetary policy too hasty and aggressive, he warned, instead of advancing the US towards normalization would risk “causing economic reverses”, before which the Fed today would have “little instruments” to respond.
The Federal Reserve chairman has indicated, however, that consensus within the Fed, as revealed by reports of recent summits and by the recent statements of several hawks and doves of the Central Bank, leans decidedly to a move now to doors. Yellen added that now, more than monetary policy, “a greater role in supporting the economy would be in the fiscal policy.”
At his words the chance to close in June by a quarter point, futures markets, have for the moment remained below 50%, but those of a maneuver in July rose to 62 percent. Dollar and bond yields, especially in the short term and more sensitive to the narrow, have reacted quickly gaining ground.
With greater precision the chairperson Fed then gave body to your message by analyzing in detail the framework of the recovery. She pointed out that the labor market is “really improved” in every respect. That “the rate of jobless” is “close to what most economists consider full employment.” It noted that the improvements in the level of labor force participation, in the past among the most striking weaknesses, “are encouraging.”
The Federal Reserve chairman warned, though – hint of circumspection with which he intends to get closer still to its decisions – such as wages have not shown “significant improvement”, such as growth remains “significantly low” and driving productivity to appear “very slow.”
Yellen, in the halls of the Radcliffe Institute for Advanced Study of the prestigious University of Massachusetts, has also elevated the tone of his speech to the challenges of longer period. “There is no better economic system of capitalism, but it can happen that periodically break,” he said. One of these “broken” was the great crisis of the past years.
The Federal Reserve Chairman expressed gratitude to his predecessor as head of the Central Bank, which took head-on the challenge of the financial debacle and the recession of 2008. “America – said – a must huge debt of gratitude to Ben Bernanke. ” Yellen acknowledged that “we had not seen the arrival of the crisis.” But his administration, he added, at last, “was nothing less than magnificent,” thanks to Bernanke.
Today, he continued taking lessons for the present, there have been important steps forward to prevent similar dangers from happening again. “A growing body of research helps our understanding of systemic risks and macroeconomics,” he assured. In particular just the Fed eral Reserve ‘is dedicating more resources to discover the risks to financial stability and better understand how to do it. ”
Compared to that time – said Yellen – there is a “new attitude in the supervision of large financial companies.” And the work of the American authorities is not isolated, it is conducted “in close contact and cooperation with regulators in other countries to deal with cross-border problems.”
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