Janet Yellen, Chair of the U.S. Federal Reserve
When the chair of the U.S. Federal Reserve speaks, the world listens. Well, OK, the entire world doesn't listen, but investors and economists all over the world do. And Janet Yellen's take on the health of the U.S. economy was largely positive. Speaking at the World Affairs Council of Philadelphia today, Yellen said:
"The news from the labor market over the past year has been generally good, with significant job gains, the unemployment rate declining below 5 percent, rising household incomes, and tentative signs of faster wage growth."
Yellen also said she sees strength in the housing market.
But analysts are always parsing the Fed chair's words for hints that might indicate whether overall the Fed is feeling a little more confident or a little less confident about economic growth. Part of that is because investors want to know when the Federal Reserve is most likely to start raising interest rates again.
A Job News USA employee directs job seekers to a career fair at Papa John's Cardinal Stadium in Louisville, Ky., on May 18. New figures from the Bureau of Labor Statistics show that the number of workers who would like to work full-time but can find only part-time work increased by nearly half a million last month.
U.S. Economy Adds Just 38,000 Jobs In May, Far Short Of Expectations
Primary voters may be having an impact on the economy even before a new president is chosen. Some analysts say a slowdown in hiring may be linked to uncertainty about the elections.
And on the downside, Yellen said, "recent signs of a slowdown in job creation bear close watching." Yellen was referring to the latest monthly jobs report from the labor department which with a gain of just 38,000 jobs nationwide was much weaker than expected. She went on to say:
"Inflation has been lower than our objective of 2 percent, but I expect it to move up over time for reasons that I will describe. If incoming data are consistent with labor market conditions strengthening and inflation making progress toward our 2 percent objective, as I expect, further gradual increases in the federal funds rate are likely to be appropriate and most conducive to meeting and maintaining those objectives. However, I will emphasize that monetary policy is not on a preset course..."
Analysts said they heard a tone shift in those last few words. In a previous speech, Yellen had said it was likely that the Fed would raise interest rates again "in coming months." That precise wording was missing from this speech. So in effect, a rate hike likely "in coming months" has been replaced by "monetary policy is not on a preset course."
James Bullard, Louis Federal Reserve President
It's a "fair assessment" that the chances of a June rate hike are now much lower, St. Louis Federal Reserve President James Bullard told The Wall Street Journal on Monday.
Following a startlingly weak jobs report last Friday, Bullard told the Journal that he would rather the Federal Reserve raise rates on the back of positive economic news. Still, he said that he maintains an open mind and won't "prejudge" the outcome of the June FOMC meeting, wherein central bank members will decide whether to adjust the Fed's interest rate target.
In fact, Bullard told the Journal that it remains "possible" for the Fed to hike rates in July.
Dollar
The dollar was little changed against a basket of currencies on Monday as Federal Reserve Chair Janet Yellen said she still expected gradual U.S. interest rate increases following a weak jobs report, but raised concerns about Britain's referendum on its membership in the European Union.
The dollar index .DXY, which measures the greenback against a group of six currencies, rose briefly on Yellen's rate-hike comment before turning modestly lower. It was last down 0.1 percent on the day at 93.925.
Oil Price
Oil futures briefly lost gains after US Federal Reserve statements on a potential interest-rate increase, but they bounced back to close Monday at a 10-month high.
At the close of trading today, West Texas Intermediate (WTI) crude for July delivery was up 2.2 percent, settling at US$49.69 per barrel on the New York Mercantile Exchange—a closing WTI hasn’t seen since 21 July 2015.
While WTI was up US$1.07 per barrel, Brent crude for July settled 1.8% higher, closing at a seven-month high of US$50.55 per barrel after hitting US$50.83 per barrel earlier in the day.
Reference: NPR, Reuters, CNBC, Oil Price
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