WASHINGTON: The US economy is healthy enough for the Fed to raise rates and begin winding down its massive bond portfolio, though low inflation and a low neutral rate may leave the central bank with diminished leeway, Fed Chair Janet Yellen said on Wednesday.
In what may be one of her last appearances before Congress, Yellen depicted an economy that, while growing slowly, continued to add jobs, benefited from steady household consumption and a recent jump in business investment, and was now being supported by stronger economic conditions abroad.
The Fed “continues to expect that the evolution of the economy will warrant gradual increases in the federal funds rate over time,” Yellen said in her prepared testimony.
Reductions in the Fed’s portfolio of more than $4 trillion in securities are likely to begin “this year,” she said.
She also noted that given current estimates, the federal funds rate “would not have to rise all that much further” to reach a neutral level that neither encourages nor discourages economic activity.— Reuters
Oman Observer is now on the WhatsApp channel. Click here
