US Federal Reserve to raise interest rates soon

Market - Himanshu Gill - Nov 21,2016

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us federal reserve to raise interest rates soon

Federal Reserve’s chairwoman Janet Yellen announced that, it could soon increase the interest rates as US economy has shown steady growth and stability.

The victory of Donald Trump in the US presidential elections has nothing to do with the Federal Reserve’s policies, Yellen said in a Congressional Committee, indicating to investors that US economy is strong enough to withstand an interest rate hike. Policy makers of the Fed are set to meet in the next month and financial markets are expecting it to take actions in this meeting.

Donald Trump had earlier criticized the Fed and other central banks that, they are taking too long to raise rates and it could fuel a bubble in the economy. He also accused Yellen and the Fed of acting politically to help Democratic nominee Hilary Clinton.

She said that the Fed has recorded continuous increase in the number of job creations and that inflation, though being below the Fed’s 2% target, is starting to pick up. She added that a further delay would increase its own risks.

U.S. consumer prices showed a rapid rise, while the number of people applying for unemployment allowance has fallen to its lowest level since 1973, the Labor Department reported this week. Housing starts and permits for construction have surged to nine year high in the US. The dollar is at a 13 year high against a basket of currencies.

The Fed raised interest rates for the first time in seven years (since recession) from nearly to zero to its current level of between 0.25% and 0.5%. Yellen also said that, the interest rate rise could also be on a gradual basis.

Ms. Yellen said it is early to predict what would be the effect of Trump’s administration on economic policies, employment, growth and prices. She also added that,  Fed will watch what Congress does next year and update its economic outlook to take those changes into account.