Federal Reserve Chair Janet Yellen said Thursday that the central bank did not make a mistake in boosting interest rates in December, a move that was followed by significant turbulence in financial markets and further weakening of the global economy.
Yellen said that the U.S. economy remains on a solid course and that she "certainly would not describe this as a bubble economy."
"The U.S. economy has continued to progress in a satisfactory way. We continue to see good job performance, some evidence of inflation moving up, so that was our expectation when we raised rates in December," she said at the International House, a New York non-profit residence for students.
"So yes, there is accommodation in the monetary policy that we have. But we think the gradual path of rate increases will be appropriate," Yellen added. "We remain on a reasonable path and I don't think December was a mistake."
San Francisco Fed President John Williams said Thursday that at least two interest-rate hikes this year is the "right course" so long as the U.S. economy continues to grow, businesses add jobs, and inflation picks up as he expects.
"If the U.S. economy continues to add jobs at the pace we're seeing, if inflation continues to improve, then clearly we should be raising rates gradually," Williams told Fox Business Network.
The Federal Reserve could stoke financial instability and set the stage for a recession if it waits too long to raise interest rates further, Kansas City Fed President Esther George said on Thursday.
George said the Fed was tempting fate by keeping monetary policy exceptionally loose when the job market appears to be near full strength and inflation is picking up.
"I believe monetary policy should respond to these developments by slowly removing accommodation," she said in remarks prepared for delivery at an economic forum in York, Nebraska.
The number of Americans filing for unemployment benefits fell more than expected last week, suggesting the labor market continued to strengthen despite tepid economic growth. Initial claims for state unemployment benefits declined 9,000 to a seasonally adjusted 267,000 for the week ended April 2, the Labor Department said on Thursday.
Japanese efforts to stem sharp increases in the yen could face increasing opposition from other major economies, making it even more difficult for premier Shinzo Abe's administration to reflate the world's third largest economy out of stagnation.
The dollar hit a fresh 17-month low of 107.67 yen on Thursday on market expectations the U.S. Federal Reserve will exercise caution in proceeding with its interest rate hike cycle.
But a Group of 20 agreement in Shanghai in February warning countries to refrain from competitive devaluation has also emboldened yen bulls.
"The G20 meeting in February touched on competitive currency devaluation, which makes it difficult for Japan to intervene. Japan is also hosting the Group of Seven this year, which makes it difficult for Japan to move," said Kentaro Arita, senior economist at Mizuho Research Institute.
Reference: AP, Reuters
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