Gradually and Cautiously

Federal Reserve Chairwoman Janet Yellen said an interest rate increase may be appropriate “in the coming months.”
Opinión
International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC
2016-06-01T15:14:53-04:00

Federal Reserve Chairwoman Janet Yellen, at a recent ceremony to receive the Radcliffe Medal granted by the Radcliffe Institute of Advanced Studies of Harvard University, said an interest rate increase may be appropriate “in the coming months,” given increasing evidence of improvement in the US economy. In any case, Chairwoman Yellen added, the central bank will proceed “gradually and cautiously.”

The conditions under which such increase would be appropriate were spelled out in the minutes of the April meeting of the Federal Open Market Committee. There has to be evidence that economic growth in the second quarter will be better than the weak performance of the previous quarter. Also, strength in the labor market has to continue and inflation has to approach the two percent objective.

Some of the headwinds that were holding back the US economy are dissipating. The Federal Reserve Bank of Atlanta projects US annual rate of economic growth for the second quarter at 2.9 percent, better than the now revised 0.8 percent of the first quarter. Employment figures for May, to be released at the end of this week, are expected to reveal job creation above the weak 160,000 new jobs created in April. Additionally, oil prices at $50 per barrel are pushing inflation close to the two percent objective.

Therefore, the President of the Federal Reserve Bank of New York William C. Dudley said “the June-July time frame is a reasonable expectation.”

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