For Federal Reserve Chairperson Janet Yellen, the possibility of a United States interest rate increase is a sign that the American economy has almost completely recovered from the recession. Yellen has not confirmed that a rate increase will occur by the end of the year, but it is certain that the proposal will be discussed at the final Federal Reserve policy meeting of this year. The meeting is set to take place on December 15 and 16.
Yellen has expressed a large amount of confidence in the United States economy in recent months. The chairperson has been pleased with the country’s job growth, although she has admitted that it is still healing and not quite at full strength just yet.
The chairperson also stated that the global economy isn’t the best right now, and inflation is expected to be moderate next year. Despite these minor issues, Yellen has said that consumer spending is “particularly solid”, and the United States economy has an overall positive outlook.
Yellen said, “When the Committee begins to normalize the stance of policy, doing so will be a testament to how far our economy has come. In that sense, it is a day that I expect we all are looking forward to.”
Most analysts and investors believe that the Federal Reserve will indeed increase its benchmark interest rate later this month. The benchmark rate has remained in the 0 to 0.25 percent range since 2008. Many economists believe that December 2015 could be the time when the American economy finally begins to hit its full stride and thrive.
Since Yellen made her remarks, the dollar has been strengthening on the international currency market. The strengthening of a currency is generally a sign that higher interest rates will soon follow.
Currency strategist Vassili Serebriakov said, “Yellen gave a fairly positive assessment of the economy that would be consistent with the Fed raising rates at their December meeting.”
Although Yellen is confident that interest rate increases are right around the corner, she wants to take things gradually as to avoid disrupting the economy.
“An abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession,” she said.
So while Yellen plans to be conservative when it comes to adjustments, this is a sign that the economy is back on track.
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