US Fed Chief: December rate hike possible

Editor’s note: Read ICR News on Friday to learn what a US rate hike could mean for Costa Rica.

By Mil Arcega

WASHINGTON DC, November 5th, 2015 (VOA) U.S. Federal Reserve Chair Janet Yellen says if U.S. economic growth continues in the coming weeks, it may be enough to justify an interest rate hike in December.  Despite weakness in export growth due to a strengthening dollar, she says the U.S. economy is “performing well.”

“Domestic spending has been growing at a solid pace.  Our trade performance net exports is soft but the committee judged in October that some of the downsides had diminished relating to global economic and financial developments,” said Yellen, who heads the equivalent of a central bank.

Despite smaller job gains in previous months, Yellen says the slack in the labor market has “diminished significantly” in 2015.  She added that inflation is likely to meet the Fed’s two percent target in the medium term.

“If the incoming information supports that expectation, then our statement indicated that December will be a live possibility,” she said.

No decision yet

Yellen insists the Fed has not made a decision on interest rates, but her statement is the clearest signal yet that a possible rate hike will be in play at the next meeting of the Federal Open Market Committee in mid-December.

The Fed’s benchmark rate has been at record lows since 2008 to stimulate the economy and create jobs.

Given improving U.S. labor market conditions, some analysts had anticipated a small rate hike in September but recent stock price volatility caused by uncertainty over slowing growth in China prompted the Fed to delay a decision.

Yellen also defended tougher banking regulations since the financial crisis for strengthening the nation’s biggest banks.  Capital at the eight largest U.S. banks has more than doubled since 2008, an increase of almost $500 billion.

The Fed chief said, “Our new regulatory and supervisory approaches are aimed at helping ensure these firms remain strong.”

Yellen made the comments Wednesday on Capitol Hill, during testimony before members of the House Financial Services Committee.