Yellen, in back-to-back appearances, could close out era of zero rates
Washington (Dec 2) Federal Reserve Chair Janet Yellen could cement the case for a U.S. interest rate hike ahead of the Fed's Dec. 15-16 policy meeting, with public appearances over the next two days at a high-profile economics group and before a joint committee of Congress.
When Yellen takes the stage at the Economic Club of Washington shortly after noon on Wednesday, she will do so with market expectations already aligned behind a December hike, and the flow of economic data since the Fed's last meeting offering no clear reason to hold back.
The data has not all been great. Recent data on consumer spending and manufacturing have caused some analysts to pare back estimates of economic growth. Global trends that have weighed on the Fed's outlook for a year now also remain intact - the high value of the dollar, the low and unsteady price of oil, and weak world growth.
But the U.S. jobs outlook continues to be strong. Economists in a recent Reuters poll expect Friday's monthly employment report from the Labor Department to show around 200,000 additional jobs were created in November, an outcome that would support the Fed's first rate increase in nearly a decade.
Even some rate hike opponents like Chicago Fed president Charles Evans have shifted tone, focusing now on the need for rate increases to proceed only gradually rather than on battling a liftoff decision that seems nearly ordained.
"It is vital that when we first raise rates, the (Federal Open Market Committee)... strongly and effectively communicates its plan for a gradual path for future rate increases," said Evans.
The CME Group's analysis of 30-day fed funds futures prices currently shows investors place the probability of an interest rate hike at nearly 80 percent when the Fed meets in two weeks. That in itself is a victory for Yellen. Heading into the October meeting investors were skeptical over whether the Fed would hike rates this year, and had criticized Yellen and the central bank for a series of communications missteps.
But the Fed's October statement quickly shifted expectations by pointing clearly at December, a process Yellen can complete in her Wednesday remarks on the economic outlook, which will be followed by a question and answer session with Economic Club of Washington president and Carlyle Group co-chief executive David Rubinstein.
On Thursday, Yellen will discuss her outlook in a hearing before Congress' Joint Economic Committee, scheduled to begin at 10 a.m.