Yellen hints at fed rate hike in March

The Dollar Business Bureau

Keeping in view the US’ recovering economy and the investors’ positive sentiments around it, the US Federal Reserve Chair Janet Yellen on Friday said the fed will adopt a more aggressive rate path ahead, first by raising interest rates at its next meeting on March 14-15, and possibly make further adjustments after the meeting.  

"At our meeting later this month, the committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal fund rates would likely be appropriate," Yellen said.

“We realise that waiting too long to scale back some of our support could potentially require us to raise rates rapidly sometime down the road, which in turn could risk disrupting financial markets and pushing the economy into recession,” she said.

Following, Yellen’s remarks, stocks went up slightly and pushed market pricing of a March hike to 80%. There has been an overall positive response from the global stocks market and investors, who had been waiting for the US fed rate to follow an aggressive approach.

However, the US President’s protectionist policies, added by his unpredictable fiscal policy may potentially pose an upside risk to the federal rate hike plans.  

Yellen has always been in favour of raising the fed rate during her three-year tenure, but the US’ contracted economic growth, low crude oil prices and sluggish inflation across the world has been dampening the effects of a strong dollar.  But this year, the Fed may be able to follow through on its forecast of three rate hikes.

“The prospects for further moderate economic growth look encouraging, particularly as risks emanating from abroad appear to have receded somewhat,” Yellen said.

The euro zone growth in 2016 stood at 1.7%, nearly matching the US economic growth, corporate profits and inflation if the euro zone in February was in the vicinity of the European Central Bank's target – giving Yellen an overall positive global scenario to hike US fed rate.

The Fed's statements seemed to complement the policymakers’ view of a stronger global economy, sustained US growth, and the possibility of tax and fiscal plans that may push economic growth even higher.