Fed Chief Yellen: Weak Economies Abroad Threaten U.S. Recovery
Source: Foreign Policy
The U.S. economy is steadily improving, but weak economies around the world are forcing the Federal Reserve to hold off on raising interest rates, Fed chief Janet Yellen told a Senate panel in remarks closely-watched — and cheered — by investors at home and abroad.
Yellen repeatedly said the Fed would have “patience” when it considered raising interest rates, which are at historic lows. That came as a relief to Wall Street, where both the Dow Jones Industrial Average and the S&P 500 reached all-time highs Tuesday because cheap borrowing costs make it easier for companies to invest in their businesses and grow. She said the Federal Open Market Committee would consider raising rates on “on a meeting by meeting basis,” more code to investors not to expect a change in the next few months.
Yellen testified for more than two hours Tuesday morning in a in a bland, flat tone. She calmly engaged critics like Sens. Rand Paul (R-Ind.), Richard Shelby (R-Alabama), and Elizabeth Warren (D-Mass.), with disagreements over a proposed audit of the Fed and broader U.S. monetary policy never escalating beyond a measured back-and-forth over complicated and sometimes arcane aspects of the broader U.S. economy.
But her real audience was Wall Street, which was unsure if a rate hike was in the works, and it seems traders came away impressed. Most analysts weren’t expecting a rate-hike until mid-year, and Yellen promised them more than a few months of cheap money. The Federal Reserve set the targeted interest rate for federal bonds at 0 to 0.25 percent. According to data compiled by CME FedWatch, short-term rate futures contracts now indicate the Fed will raise rates in October 2015 as opposed to September 2015, the target date before her testimony. It would be the first federal interest rate hike since 2006.
Read more: http://foreignpolicy.com/2015/02/24/fed-chief-yellen-weak-economies-abroad-threaten-u-s-recovery/?wp_login_redirect=0
What she says is true. I don't know where we are now but another view of this in late-2014 is the US economy was the only holding the world economy from sliding into a global recession.
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