The new Federal Chair Janet Yellen said that the Fed won’t be waiting too long to raise the interest rates, noting delaying action would possibly “overheat the economy” and that could do more damage to the recovery.
Yellen said that the Fed is still looking to raise rates sometime this year, with September still not off of the table at this point. Many economists consider Yellen to be a very cautious person, so hearing Yellen say that the Fed is still likely going to raise the key interest rate this year is a sign the economy is going to pull through. Yellen did express some concerns with the recent struggles of the economy, noting that the job gains have become a little weaker in 2015 than expected. Wages are also not picking up as expected, and the overall economic growth has remained fairly flat this year.
While Yellen still is looking at a target date of September to raise the interest rates, she did note the economy was not there yet, which does mean the rate hike won’t be happening in June as initially thought earlier this year.
Experts tend to believe the rate hike will be in September, but economists are looking beyond that first rate hike for what will be coming next. It is not known whether or not the Fed will be looking at more hikes in the months following or what percentage points the Fed is looking at going for overall. So even though the hike is coming soon, the bigger question is what follows afterward and how that will impact the less than stable economy. Yellen has talked about the 6-year recovery period and how well the economy has been bouncing back, including how there are jobs being gained still, which is better than losing jobs.
Most people believe that this summer will play a huge role in the Fed’s decision as far as raising more than one of the interest rates. Yellen has expressed optimism about the economy for later in the year, but has also admitted the progress so far in 2015 is not as good as what she or others had expected. Yellen did say that some economic headwinds are still influencing the economy, which has put a damper on things, and it’s not really known yet when those headwinds will go away. Until then, investors and economists are expecting that at least the key interest rate will be hiked this year, most likely in September, and this will be the final sign needed from the Fed that the economy is once again booming as it should be. It is important though to remember, there should be cautious optimism about this move, since it’s not known what raising the rates will do on Wall Street or how the markets will react to the hike once it happens. Doing things too fast will likely cause worry and anxiety on Wall Street, so the upcoming moves will have to be done at a slow manner, which shouldn’t be an issue since Yellen is overall a cautious person anyways.