The president of the US central bank (Fed) Janet Yellen reiterated Wednesday that it expected a gradual rise in interest rates in the United States but became concerned about the impact of the slowdown in Global economy.
Economic developments abroad “pose risks to US growth,” Ms. Yellen estimated in a speech before the Finance Commission of the House of Representatives.
Ms. Yellen reported including “uncertainty about exchange rate policy” in China that raise “the volatility in financial markets.”
The boss of the central bank also believes that if they continued, financial conditions less favorable to the United States – whether the decline in shares on the stock market or a new appreciation of the dollar – can “weigh on activity and the market work”.
“The Monetary Committee closely monitors economic and financial developments in the world,” she said, repeating the motto of the latest release of the Monetary Committee of the Fed (FOMC) in late January that left the interest rates unchanged .
The Fed had modestly increased in December after seven years of zero interest rate policy to support the recovery. They are currently between 0.25% and 0.50%.
Yellen is careful to explicitly close the door to a further increase in the monetary meeting on 15 and 16 March, “the Committee anticipates that economic conditions will change so that only a gradual rise in rates will be required,” she repeated.
Asked about the possibility of negative rates, Yellen said, “even if there is always a risk of recession (…) I do not think it will be necessary to cut rates,” is again close zero or in negative territory. She also acknowledged that monetary policy divergence within the euro area in particular put an upward pressure on the dollar.
Economies with low oil
Yellen has ensured that inflation low longer maintained because of energy prices, was up around 2% over the medium term and noted the “significant” progress in the job market. The unemployment rate fell to 4.9% in January. positive note, falling oil prices equivalent to $ 1,000 savings per year for Americans, she said.
She suggested during the question session that low wage growth was partly explained the poor turnout in the labor market in the US. Taken part on the lack of diversity in the central bank and the disparity in unemployment rates affecting the black community, Yellen acknowledged that it was “highly desirable” to have for the first time at the head of a regional bank Fed, a black president.
The US economy should “pursue a moderate growth”, she also assured while “global economic growth is expected to recover over time”, supported by the ultra-accommodative monetary policies.
But the sources of concern are many suggesting that the Federal Reserve may be slower to raise interest rates.
At the beginning of the year, Fed members thought they could tighten credit by four times this year to gradually increase interest rates to 1.4%. This scenario seems less likely in view of the international slowdown and turmoil in financial markets.
615 billion for Americans
On China, Ms. Yellen held that “although recent economic indicators do not suggest a sharp slowdown in Chinese growth, the decline in the value of the renminbi (another name for the yuan, Ed) has intensified uncertainty on policy changes in China and the prospects of its economy. ”
It regrets that these uncertainties have “increased volatility in international markets and (…) exacerbated concerns about the outlook for global growth.”
“If these downside risks were to materialize, the business abroad and the demand for US exports could weaken while conditions in the financial markets could tighten even more,” says Yellen.
Referring to the large Fed balance sheet after the massive purchases of Treasury bonds to support the economy, the ruling suggested that it was not yet time to sell these assets. “It would be destabilizing for the economy,” she said pleading to wait until interest rates “are higher.”
She stressed, however, that, thanks to the performance of these assets, the Fed had returned to the government and therefore “taxpayers” about $ 615 billion since 2008.