Friday 19 January 2018

US expects gradual interest rate rise

Janet Yellen, chair of the Federal Reserve. Photo: Getty Images
Janet Yellen, chair of the Federal Reserve. Photo: Getty Images

Jeanna Smialek

The US central bank expects to continue to raise interest rates gradually as solid growth, a strong labour market and a healthy global economy lift prices, according to Federal Reserve chair Janet Yellen.

She acknowledged that US inflation remains surprisingly low.

"My best guess is that these soft readings will not persist, and with the ongoing strengthening of labour markets, I expect inflation to move higher next year," Ms Yellen said yesterday in Washington DC.

Ms Yellen's term expires in February and she is said to be among the candidates US President Donald Trump is considering is considering to be his pick to lead the central bank.

She has presided over a sustained recovery from the global financial crisis, though inflation has remained below the Federal Reserve's 2pc goal, a development that has puzzled policy-makers at a time when the unemployment rate has fallen past its pre-crisis low.

"The biggest surprise in the US economy this year has been inflation," said Ms Yellen. While the chair expects a pick-up, she and her colleagues "recognise that this year's low inflation could reflect something more persistent than is reflected in our baseline projections".

Inflation came in at 1.3pc in August after stripping out volatile food and fuel, well below the Federal Reserve's goal.

Irish Independent

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