Fed: More progress on inflation needed before rate hike

Governor Yellen says Fed must make sure U.S. economy is "doing well"

Fed: More progress on inflation needed before rate hike


The U.S. Federal Reserve held interest rates Thursday.

In a press conference after the decision, Fed Governor Janet Yellen said that the Federal Open Market Committee, which makes the interest rate decision, was not satisfied with progress in the U.S. economy.

"Unemployment declined, and labor market conditions have continued to improve. But there is still slack in the labor market to be taken up," Yellen said.

"But inflation is still too far below our objective of 2 percent. We expect to achieve our goal of two percent in the medium term. Declines in import prices reflecting the appreciation of the dollar, and low energy prices have created transitory obstacles to the achievement of our goal. We expect these transitory obstacles to dissipate. As the labor market improves, there will be upward pressure on inflation."

Yellen cited the recent financial volatility in China as a factor the committee took into account.

"Recent global developments could put downward pressure and affect U.S. activities somewhat," Yellen said.

"The first increase will be appropriate when there is improvement in the labor market and we are closer to our  2 percent objective for inflation. Wage rises are still too low, however."

Yellen warned that the committee will base its assessment on a wide range of incoming information. She warned that specific data improvement would not be sufficient to spur a rate hike.

Yellen forecast GDP growth in the U.S. at 2.5 percent in the first half, an increase on previous Fed forecasts.

"But growth in business fixed investment was moderate and the strong dollar has hit exports," Yellen said. 

"When we see progress on inflation, we will diminish the extraordinary degree of accomodative monetary policy in place now," Yellen said.

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