The U.S. economy continues to improve with decreasing unemployment and improvement in the housing sector. This according to Chairman Janet Yellen who made the report at Wednesday’s FOMC meeting.
The statement sent U.S. stocks rallying for the second straight day.
Yellen is looking for ways that would justify the Fed initiating the first rate increase in almost a decade and she told the FOMC that if the economy continues to improve as she expects, the Fed is likely to make its move as soon as September.
“Most peoples’ expectations are that we’re going to get a hike by the end of the year, and the Fed today didn’t do anything to change that narrative,” said Joe Bell, a Cincinnati-based senior equity analyst at Schaeffer’s Investment Research Inc.
Speculation Continues
Speculation until now has been that Yellen would continue to postpone the rate increase beyond September and towards the end of the year. The Greek crisis and the turmoil in China’s stock markets raised concerns that the Fed would decide it wasn’t the right time to make a major move.
The Fed has remained cautious of a too early or too late increase. According to Yellen, a premature rate increase could derail the recovery. On the other hand, waiting too long might force the Fed to tighten the economy at a too rapid pace.
The Fed Chair believes that the subsequent pace of the increases was more important than the exact timing of the increase.