Yellen: Case For Rate Change Has Strengthened

Date: August 29, 2016

But Fed Chairman Gives Little Guidance On When Rate Hike Likely

In remarks at the Kansas City Federal Reserve Bank’s symposium in Jackson Hole, Wyoming on Friday, Federal Reserve Board Chairman Janet Yellen indicated that the Fed’s Open Market Committee is likely to raise the benchmark federal funds rate this year, but did not give any hints on when the central bank would act. The Washington Post reported Yellen “signaled that the central bank is moving closer to raising its influential interest rate.” While she “acknowledged that the recovery’s momentum remains tepid,” Yellen discussed a consistently strong job market and low unemployment rate. To that point and most notably, she said, “I believe the case for an increase in the federal funds rate has strengthened in recent months.” However, Yellen “emphasized that no decisions had been made and that any forecast is inherently uncertain.” The New York Times said Yellen’s remarks “indicated that the Fed would consider raising rates at its next meeting in mid-September, though most analysts say they think the Fed is more likely to move in December.” The Wall Street Journal reported the dollar rose 0.8% at 86.47 after Yellen’s speech on Friday, which put the US currency close to its highest this session.

What This Means For Small Businesses

Chairman Yellen’s view that the strength of the labor markets will likely merit a rate hike provides modest assurance to small business owners that the recovery will continue to strengthen. However, in her remarks, Yellen hedged her opinion, providing little fuel for a small business revival. As NFIB Chief Economist Bill Dunkelberg explained in the latest NFIB Small Business Economic Trends report, “Uncertainty is high, expectations for better business conditions are low, and future business investments look weak. Our data indicates that there is little hope for a surge in the small business sector anytime soon.”

Other Reading

Other coverage of the Fed’s Jackson Hole meeting ran in the Wall Street Journal, the Wall Street Journal, and CNBC.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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