The Yellen covers the cards on rising rates – Il Giornale

Rodolfo Parietti

Before you show unpleasantly surprised: the data on the US labor market in May, when only 38 thousand jobs were created, were “disappointing” and “care.” Then, down: “The wage growth is finally accelerating.” To pull the sums, therefore, a gradual rise in rates is “appropriate.” On the eve of the meeting of the FOMC (the monetary policy operational branch), hosted by the World Affairs Council of Philadelphia, the chairman of the Federal Reserve, Janet Yellen, he remained vague yesterday, without any reference to the tightest possible timing. “It is something on which we have no certainties, and that you will see over time,” he explained. Words very different from those uttered, as recently as a few weeks ago, by some governors of the central bank in favor of a rapid steering strictly, to repeat so by December. The markets accredit zero probability that the crackdown is ladled tomorrow. All convinced that the bowls remain steady at least until July, although some estimates converge on a single intervention at year end, once closed the parenthesis of the presidential elections. “We’ll see what will happen”, merely responding to Yellen to those who asked if the world economic crash risk in case of victory of Donald Trump that he would like to replace it with a repubbblicano.

But the first woman president of the Fed has other things to think about. More than the Brexit, which although “could have significant financial implications”, is the icy employment data last month, topped off with the worst quarterly performance in recent years (the monthly average of new jobs has fallen to 116 thousand share), as be a real headache. For sure, the labor market health has removed any room for maneuver on interest rates and slowed the monetary policy normalization process started, with difficulty, in December last year with the first touch-up since 2006. “In an economy quite normal would be appropriate to have higher rates, “said the Yellen. Thereby admitting that America is not yet out of the emergency phase. Moreover, the Fed itself sees four more risks for the US economy: demand and slower productivity, risks to inflation and to the overseas situation.

The Yellen, however, remains “cautiously optimistic.” Hopes are pinned on an improving economy, such as to allow to meet the objective of a 2.2% GDP growth in 2016. “If the incoming data will be aligned with a strengthening of labor market conditions and inflation progress towards our target of 2%, as I expect, it is likely that further gradual increases in the interest rate on federal funds are appropriate and useful to reach and maintain those goals. ”