Yellen says “room for improvement” before interest rates can be raised

rate hike

Forecasts released by the Fed yesterday showed most officials expect to begin raising short-term interest rates before the end of the year.

However, in their statement Fed policy makers reiterated that they must be “reasonably confident” that inflation will move back to their 2 percent target over the medium term before raising interest rates. Inflation minus food and energy decelerated to 1.2 percent for the year ending April, compared to 1.4 percent the year before.

Chairwoman Janet Yellen said that there was “room for further improvement” in the economy before interest rates would be raised. She cited signs of “cyclical weakness” in the labor market, and noted wage growth remains “subdued.”

Stocks rose after the Fed announcements, with the Standard & Poor’s 500 Index up 0.2 percent to 2,100.44 in New York. The Dow added 31.26 points, or 0.2%, capping a back-and-forth session for stocks. The S&P 500 rose 4.15 points, or 0.2%, and Nasdaq gained 9.33 points, or 0.2%.

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