The Fed never clearly explained why they did not hike the rates.
Yellen’s comments came in a 23-page speech that was accompanied by numerous charts, economic formulas and footnotes, which provided an extensive review of the Fed’s views on factors that influence inflation.
Today will feature a number of key economic releases, including the August personal income and consumption data that could indicate building wage inflation pressure, something Fed policymakers are keen to see as a justification for higher interest rates.
“The reason we are going to go quite slowly, we think, is because the <strong>economystrong> is not really that strong and monetary <strong>policystrong> probably isn’t quite as easy as people think it is, just judging by the level of short-term <strong>interest ratesstrong>”, Dudley said.
Expectations for a rise in ultra-low rates, which have cut the opportunity cost of holding gold while weighing on the U.S. dollar, have helped push the metal down 5.00 per cent this year.
Last Wednesday, however, a surprisingly hawkish-sounding Mario Draghi said the European Central Bank needed more time to assess whether China’s slowdown, particularly its impact on commodity prices, cheap oil and a rising euro, would slow inflation further. She also pointed to energy prices as weighing substantially on headline inflation over the past year, which plays a role in a rate hike.
Yellen’s remarks last week indicating the first rate hike since 2006 was still on track for 2015 has been echoed by other Fed officials. Traders are pricing in a 18% probability of the U.S. central bank raising the benchmark rate by its October meeting and a 43% likelihood by the December meeting, according to data compiled by Bloomberg.
The policy setting Federal Open Market Committee voted earlier this month to delay raising rates, citing primarily overseas financial turbulence that roiled US markets in August. He does not see inflation reaching the Fed’s 2% target until 2018. When there’s little to no growth, the Fed encourages spending and hiring by lowering these rates.
“It’s not for me to say what the market expectation should be”, he told a Wall Street Journal event Monday in New York, acknowledging that the Fed and economists have been consistently overly optimistic on growth and rates in recent years.
The Fed’s deliberations are taking place as the labour market improves and inflation remains stagnant. Fed Bank Presidents William Dudley, Charles Evans and John Williams are scheduled to speak about monetary policy and their outlook for the economy throughout next week.
Dudley said he was confident that weak global economic conditions and the strong USA dollar would prove to be passing influences and allow the Fed to raise rates soon.