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Yellen tells US senators no rate rise soon amid concerns abroad
[WASHINGTON] Federal Reserve chair Janet Yellen told Senate Democrats she's encouraged by the national economy even as she expressed some concern about the pace of hiring in the US and the weakening global outlook.
"Her message is that the economy's getting better but there's still a ways to go in terms of job creation," New York senator Charles Schumer said today in an interview on Capitol Hill. "That worry seems, in her min
d, to be paramount and that's why she is not going to raise rates immediately." The Fed upgraded its assessment of the US economy in a statement on Wednesday after a meeting of its policy-setting committee, while adding a reference to "international developments" which investors took as a sign of mounting worry about weakness overseas.
Fed spokesman Doug Tillett declined to comment on the content of Yellen's conversation with lawmakers, which was held at a private luncheon at the Capitol.
Ms Yellen shared "some concern about the foreign situation," said Virginia senator Tim Kaine, who said her comments were "pretty positive about the fundamentals here."
Economists said the confident tone of the statement from the Federal Open market committee signals it is on track to raise interest rates this year, while making the point it is not ignoring the weaker performance of the global economy.
US stocks rose to the highs of the day after the senators' remarks on their meeting with Yellen were reported.
The Standard & Poor's 500 Index advanced as much as 1.1 per cent before closing 1 per cent higher at 2,021.25.
The International Monetary Fund has made the steepest cut to its global-growth outlook in three years, with expectations lowered for Europe, China and Japan.
The European Central Bank last week announced an expanded asset purchase program of as much as 60 billion euros (US$92 billion) to spur growth and counter deflationary pressures, highlighting the divergent economic outlooks for the US and euro area.
Illinois senator Dick Durbin said the situation in Europe was discussed as one of the risks to the outlook, although Ms Yellen had been "very positive" in her comments on the US.
She cited fiscal policy as being more neutral now for growth, compared to the drag on the economy from government spending cuts imposed during recent years, Mr Durbin said.
"It was positive, very positive," he said. "There's work to be done. There are risks. We talked about the situation in Europe being one of those risks," Durbin added.