Federal Reserve Chair Janet Yellen said she’s confident in the outlook for economic growth and warned that waiting too long to end the era of near-zero interest rates could force the central bank to tighten too quickly, which would risk disrupting financial markets and the six-year expansion.
“Were the FOMC to delay the start of policy normalization for too long, we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals,” Yellen told the Economic Club of Washington on Wednesday. “Such an abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession.”
Her comments are the latest sign that the policy-setting Federal Open Market Committee is poised to raise interest rates for the first time since 2006 at its Dec. 15-16 meeting in Washington. Fed officials have been trying to gauge whether the economy is headed toward their goals and can sustain growth as rates increase.
“On balance, economic and financial information received since our October meeting has been consistent with our expectations of continued improvement in the labor market,” Yellen said Wednesday. That “helps strengthen confidence that inflation will move back to our 2 percent objective over the medium term.”
Yellen emphasized that policy makers will receive a range of data on the labor market, inflation and economic activity between now and the December meeting that will influence their decision.
‘Mind Is Set’
Even so, “you come away thinking that her mind is set on a rate hike in December,” said Millan Mulraine, deputy head of U.S. research and strategy at TD Securities LLC in New York. “We got the sense from her that what she’s seen so far is that the economy can handle that initial rate hike.”
The Fed’s Beige Book economic survey, released later Wednesday, showed a “modest” pace of expansion across most of the U.S. in October and November amid rising consumer spending. Pay gains were described as “generally stable to increasing,” with most districts saying wage pressures were only building for skilled workers and employees in short supply.
The yield on 10-year Treasury notes climbed from a one-month low and the dollar hovered near the highest in more than a decade as investors reacted to Yellen’s remarks, which also pointed to recent improvements in the labor market and wages as positive signs.
“We have seen a welcome pickup in the growth rate of average hourly earnings for all employees and of compensation per hour in the business sector,” she said. “While it is too soon to conclude whether these more rapid rates of increase will continue, a sustained pickup would likely signal a diminution of labor market slack.”
U.S. employers added 271,000 jobs in October, the most this year, and unemployment has dipped to 5 percent, half of its 2009 peak. The Labor Department’s gauge of average hourly earnings has shown early signs of picking up, with 2.5 percent year-over-year growth in October, the highest since 2009. The final employment report before the December meeting is scheduled for release on Friday in Washington.
Inflation remains subdued, though, and the Fed’s preferred gauge hasn’t hit policy makers’ 2 percent goal since 2012. Yellen signaled confidence that price pressures may be moving up, referencing core inflation rather than the headline index the Fed prefers.
“It appears that the underlying rate of inflation in the United States has been running in the vicinity of 1-1/2 to 1-3/4 percent,” Yellen said, once the core data are adjusted for downward pressure from low oil prices and a stronger dollar. She noted that policy makers are paying close attention to indicators of inflation expectations, some of which have shown deterioration recently.
The initial rate liftoff is expected to be small, just 25 basis points, and Fed speakers including Yellen have emphasized that the pace of tightening going forward is more important than the timing.
“The Committee anticipates that even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run,” Yellen said Wednesday.
Yellen said the neutral interest rate — the one that neither stokes nor slows the economy — seems to have declined in the wake of the financial crisis, and its future path is uncertain. That could have implications for the pace of increases and ultimate level of the central bank’s main interest rate.
“If the Fed now thinks, as Yellen illustrated today and as the October FOMC minutes indicated, that the neutral real rate is close to zero, there is no way in the world the Fed will get even remotely close to 3.5 percent in this cycle,” Roberto Perli, a former Fed official who’s now a partner at Cornerstone Macro LLC in Washington, wrote in a note to clients. That number, 3.5 percent, is the median longer-run projection for the rate that Fed officials submitted in September.
Yellen sounded optimistic on the international outlook, saying China, which has seen growth slow this year, has taken actions to stimulate its economy and noting that other emerging-market economies are also easing monetary and fiscal policy. She said activity in those places has improved, and accommodative policy in advanced economies is also helping to support growth.
“A pickup in demand in many advanced economies and a stabilization in commodity prices should, in turn, boost the growth prospects of emerging market economies,” Yellen said.
Yellen will have another chance to elaborate on her outlook in testimony Thursday before Congress’s Joint Economic Committee.
IMF to Review Nigeria’s Growth Forecast Amid Destruction of Businesses, Properties
IMF Says it May Review Nigeria’s Growth Amid Recent Development in the Country
Following the destruction of businesses and properties that trailed the #EndSARS protest, the International Monetary Fund (IMF) has said it may review the nation’s growth forecast in view of the new development in the country.
Abebe Selassie, the Director, African Department, International Monetary Fund, made the statement while responding to questions during a virtual IMF press conference on the economic outlook of Sub-Saharan Africa on Thursday.
According to him, the protest is difficult given that Lagos is a very important economic hub and contributes to the overall Nigeria activities.
Selassie said, “On the growth projections in Nigeria, I mean, these protests happened of course, after we had closed, after the period where the data we looked at in making the growth projections for this economic outlook.
“And much will depend really on how these protests evolve.
“Lagos of course, is a very important economic hub and contributes quite a bit of economic activity to overall Nigeria activities.
“So, if these persist and are showing significant effects on economic data, we will internalise them in due course.”
He further explained that the nation’s economy had been a difficult one in the last four years ever since oil prices plunged in 2015-16.
He said, “I think this is exactly why we have been on the record in Nigeria about how really critical it is to get all of the policy induced barriers out of the way to facilitate stronger economic growth.
“For the government to do more to raise revenues through the area of non-oil resources to be able to invest in health education which would, you know, allow people to be more successful at getting jobs but also improve the economy’s potential.
“So, I think that development agenda that Nigeria has, I think, has to be tackled with gusto and vigor so that the millions of jobs that the country needs can be created.”
Oil Marketers Lose Millions as Hoodlums Set Petrol Tankers on Fire
Oil Tankers Burnt by Hoodlums as Marketers Lose Millions to Protest
Oil marketers lost millions of Naira to repeated attacks by hoodlums exploiting the #EndSARS protest.
The Independent Petroleum Marketers Association of Nigeria on Thursday said hoodlums have been attacking their trucks since they hijacked the protest earlier in the week.
The association said three petrol laden trucks were burnt again on Thursday in Warri, Delta State.
This came as the Board of Trustees of the Oil and Solid Mineral Producing Area Landlords Association of Nigerian urged protesters across the country to sheathe their swords as the destruction of oil assets and others had become alarming.
Chief Chinedu Ukadike, the Public Relations Officer, IPMAN, who spoke in Abuja said three petrol tankers with petroleum products estimated at about N90 million were set on fire on Thursday.
He said, “The protesters are burning our petrol trucks as we speak right now in Warri. They are burning three trucks. The cost or value of the content in those trucks is about N90m.
“That is outside the worth of the trucks that are being burnt. This is why we asked our tanker drivers to park or temporarily halt the movement of products.”
Ukadike said the association decided to halt the movement of petroleum products on Wednesday to avert a further disaster that could arise attack of oil tankers by angry protesters.
“That advise on the temporary halt of tankers movement was vital, particularly for volatile locations where protesters are highly aggressive. So that is what is happening now in Warri, the petrol trucks of oil marketers are being burnt,” he stated on Thursday.
LCCI Says FG Loses N700bn to #EndSARS Protest in 12 Days
Nigeria Loses Over N700 Billion to #EndSARS Protest in 12 Days
The Federal Government lost over N700 billion to the #EndSARS protest in twelve days, according to the Lagos Chamber of Commerce and Industry (LCCI).
Mrs. Toki Mabogunje, the President, LCCI, disclosed this while reviewing the economic implications of the just ended #EndSARS protest.
Mabogunje, who appreciated the value of citizens engagement and the demand for accountability which the protest represents, lamented the negative effect on the nation’s economy.
She said, “These are in consonance with democratic norms. They also form vital ingredients for good governance.
“LCCI is however concerned about the negative impact that the protracted nature of the EndSars protests has on business activities across the country.
“Over the past twelve days, economic activities have been crippled in most parts of the country and has been particularly profound in the urban areas.
“The Nigerian economy has suffered an estimated seven hundred billion naira (N700 billion) loss in the past twelve days.”
She further said the protest has reawakened the need to reform the shortcomings in the nation’s political governance, however added that to protect livelihoods of Nigerians, including business community, the protesters need to move to next stage of civic engagement.
“This is necessary to reduce the massive disruptions, blockades and barricades around our major cities and interstate highways. These actions have been at great cost to the economy and the welfare of Nigerian citizens. It should be noted that our economy is still reeling from the shocks of the Covid 19 Pandemic and struggling to recover from its devastating effects,” she added.
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