(MENAFN- The Peninsula) Federal Reserve chair Janet Yellen yesterday said she expects the Fed to raise interest rates at some point this year, but pointed strongly to her concerns that US labour markets remain weak and that more workers could be encouraged back into the job market with stronger growth.
In a speech that cautioned about the status of workers as well as some of the international risks that have developed, Yellen gave no direct hint about whether she anticipates more than one rate hike over the Fed's four remaining meetings in 2015.
She said she expects the economy should grow steadily for the remainder of the year, and that would at least allow the Fed to move ahead with its first rate hike in nearly a decade.
"I expect it will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalizing monetary policy," Yellen said in a speech to the City Club of Cleveland, a civic group that sponsors high-level speakers.
"But I want to emphasize that the course of the economy and inflation remains highly uncertain...We will be watching carefully to see if there is continued improvement in labor market conditions, and we will need to be reasonably confident that inflation will move back to two percent in the next few years."
Despite the improvement of recent years, she said labor markets remain out of line, with high levels of part-time work and weak participation rates.
The low unemployment rate "does not fully capture the extent of slack," she said. "I think a significant number of individuals still are not seeking work because they perceive a lack of good job opportunities and that a stronger economy would draw some of them back into the labor force."
Yellen's remarks come less than a week before she is to appear before Congress for a biannual briefing before lawmakers, and as the central bank approaches a likely rate hike decision.
It is a step that will have global implications, putting the Fed on a path separate from central banks in Europe and Japan that continue fighting economic crises, and potentially drawing capital out of developing economies.
According to the individual economic projections released by Fed officials at their June meeting, there was a roughly even divide between those who expect only one interest rate increase this year - and might thus be prepared to wait late in the year to hike - and those who expect two and would want to move sooner. Yellen's position is uncertain, and her influence as chair is likely pivotal in the ultimate decision.
Fed officials seem to have set the stage for an initial increase as early as September. But recent events - the stock market collapse in China and the confusion in Greece in particular - have raised fresh concerns over how the world economy may hurt US growth. Investors now believe an initial hike is not likely until next year.
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