Business / Economy

Yellen signals Fed rate hike this year but mum on timing

Kyodo

The U.S. central bank indicated Wednesday it is likely to raise the ultralow interest rates later this year although its policy-setting panel gave no new words regarding exactly when it could take place.

“Clearly most participants are anticipating that a rate increase this year will be appropriate,” Federal Reserve Chairwoman Janet Yellen told a press conference after a two-day policy-setting meeting, citing a stable recovery of the U.S. economy.

The Federal Open Market Committee decided to keep the interest rate at zero to 0.25 percent and sharply revised downward the outlook for the country’s economic growth for this year, while maintaining its projections for next year.

In a post-meeting statement the Fed said it will be appropriate to raise the interest rate range when it is “reasonably confident” that inflation will return to its 2 percent target over the medium term, using phrases seen in previous statements.

The Fed lowered its projection for the overall U.S. growth in 2015, measured by inflation-adjusted gross domestic product, to “1.8 to 2.0” percent from “2.3 to 2.7” percent in an earlier forecast released in March.

But Yellen said the slower forecast was due to “transitory factors,” apparently referring to cold weather earlier this year and weak exports, and the Fed expected economic growth in 2016 to increase to “2.4 to 2.7,” almost unchanged from its March projection.

The Fed became less optimistic about the unemployment rate, estimating the figure for 2015 at “5.2 to 5.3” percent, compared with “5.0 to 5.2” percent in its earlier estimate. It kept the jobless rate forecast for the year unchanged at “4.9 to 5.1” percent.

“Economic activity has been expanding moderately” since the previous FOMC meeting in late April after having changed little during the first quarter of this year, the Fed said in Wednesday’s statement.

Growth in household spending has been “moderate” but corporate fixed investment and exports “stayed soft,” it said.