Wednesday, 30 March 2016

Yellen says Fed should proceed 'cautiously' given global risks

U.S. Federal Reserve Chair Janet Yellen holds a press conference following the two-day Federal Open Market Committee (FOMC) policy meeting in Washington in this March 16, 2016, file photo.  REUTERS/Kevin Lamarque/Files

Federal Reserve Chair Janet Yellen said on Tuesday that global risks were not expected to have a deep impact on the United States but that it was still appropriate for the Fed to proceed "cautiously" in hiking interest rates.

"Developments abroad imply that meeting our objectives for employment and inflation will likely require a somewhat lower path for the federal funds rate than was anticipated in December," when the Fed raised rates for the first time in a decade, Yellen said at the Economic Club of New York.

"Given the risks to the outlook, I consider it appropriate for the Committee to proceed cautiously in adjusting policy," Yellen said.

In her first remarks since a press conference after the Fed left rates steady at its most recent meeting earlier this month, Yellen said she still expected headwinds from weak growth abroad, low oil prices and uncertainty over China would abate and allow the recovery to continue.

"The overall fallout for the U.S. economy from global market developments since the start of the year will most likely be limited," Yellen said. "Developments have not materially altered the Committee’s baseline - or most likely - outlook for economic activity and inflation."

Related coverage:
Oil prices fell more than 3 percent on Tuesday, reflecting growing concern that a two-month rally could fade as demand fails to keep up with swelling global supply including new output from Kuwait and Saudi Arabia.

Kuwait and Saudi Arabia's decision to resume oil production at the jointly operated 300,000-barrels-per-day Khafji field, at a time when production is supposed to be frozen, triggered the heavy selloff in the oil markets, traders said.

"The capacity of that field in the Neutral Zone is more than what Ecuador produces. If they do freeze it will not be at the January levels but at a lot higher figure," one trader said, referring to the Kuwait-Saudi border area where Khafji is located.

Oil prices have risen more than 30 percent since mid-February, ahead of an April 17 meeting in Doha where the Organization of Petroleum Exporting Countries (OPEC) and other major suppliers including Russia will discuss an output freeze aimed at bolstering prices.

But with global inventories swelling and signs some OPEC members are losing market share, the meeting is unlikely to do much to prop up prices, analysts and traders said. Rising demand for gasoline in the United States is not seen as keeping pace with the increased worldwide supplies.

Reference: Reuters

No comments:

Post a Comment