We find Federal Reserve Chair Yellen’s confidence in the economic outlook during her remarks at Jackson Hole consistent with a near-term rate hike.
As we expected, Yellen stated, “in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months.” Her renewed confidence in the outlook for activity and inflation stems largely from the improvement in labor markets since mid-year and the rebound in household spending. Finally, we note that the chair made no mention of the risks outlined in her June speech, including concerns over the resilience of domestic demand, sustainability of Chinese growth, nor the aftermath of the UK vote on EU membership. Although some FOMC members have persistent lingering concerns about inflation, we read Chair Yellen’s comments as in line with other FOMC communication in recent weeks which has consistently sounded hawkish, with most committee members indicating that at least one rate hike this year appears warranted.
In our view, her statements were as strongly worded as possible and we read her statements as consistent with a rate hike in September. We maintain our call for a September rate hike, subject to another solid employment report in August.
Copyright © 2016 Barclays Capital, eFXnews™Original Article
