Federal Reserve Board Chair Janet Yellen spoke after the Fed’s Open Market Committee meeting Wednesday. Here are three takeaways:
First, “gradual” is the new normal. A majority of Fed policy makers see an interest rate hike coming later this year, as long as economic conditions are right. And they see more interest rate increases next year. But Yellen kept stressing at the press conference that the rate hikes will be gradual. It’s not like the Fed will double interest rates overnight.
Second, the Fed thinks the economy will improve later this year. Yellen says the economic setbacks at the start of this year are only temporary. The port disruptions on the West Coast are over, the rough East Coast winter has (thankfully) ended. The fall in energy prices that kept inflation lower than the Fed wanted is also easing.
Third, we won’t make Europe happy. International Monetary Fund Managing Director Christine Lagarde called on the Fed not to raise rates until next year. Asked about this at the press conference, Yellen said the Fed would do what it had to do — raising rates later this year, as long as the U.S. economy is strong enough.
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