Continued and solid job growth in the United States has made it more likely that the Federal Reserve will raise its short-term interest rates in the coming weeks or months. The upbeat assessment of the U.S. economy came Friday during a much anticipated speech by Fed Chair Janet Yellen in Jackson Hole, Wyoming.
"In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months," Yellen said.
Yellen gave no indication of when rates might rise, but her remarks open the possibility that an announcement could come in late September, when central bank officials meet again. Another possibility is after the Fed meeting in December. Most analysts tell VOA a rate hike in November — so close to a U.S. presidential election — is unlikely.
Market reaction has been generally positive. The Federal Fund's rate, the rate the central bank charges other banks on overnight loans, has remained near record lows since late 2008 to stimulate business and consumer spending. The last time the Fed raised its rates was nine months ago. Since then, slower growth overseas and market shocks caused by the Brexit vote in the United Kingdom has made the Fed extremely cautious.
Stock market investors have benefited from low interest rates and tend to get nervous when the Fed talks about rate hikes. But Maya MacGuineas at the Committee for a Responsible Federal Budget says rising interest rates are a sign of a healthy economy.
"The real opportunity for rate hikes was last year,” MacGuineas said. “It got increasingly complicated this year because we waited until things were jittery."
Analysts say the timing of the next rate hike is likely to hinge on the strength of new economic data in coming weeks — particularly the job numbers due out in the first week of September and inflation data, which has remained below the Fed's target range of two percent.
