Federal Reserve’s former chair Janet Yellen expects three to four US rate increases over the next year
- Former Federal Reserve chair Janet Yellen predicted that the US central bank would continue its rate hike pace next year as the US economy is performing ‘exceptionally well’
- Yellen sees three to four rate increases over the next year
The US Federal Reserve will continue the current pace of normalising its monetary policy because the American economy is doing “exceptionally well,” though this will create a tougher economic environment for emerging markets including China, its former chair said on Tuesday.
“Normalisation of both short rates and the balance sheet are proceeding smoothly and, with the economy performing so well, Chair Powell and the [Federal Open Market Committee (FOMC)] are continuing the process of removing monetary accommodation to return the federal funds rate to a neutral stance,” Janet Yellen said via video during Caijing magazine’s annual conference in Beijing, adding that she expected rates to rise by three to four times over the next year. “I expect that to continue over the next year unless there are significant economic surprises.”
The US Fed is scheduled to next meet on December 20, so Yellen’s comment implies a rate increase then, followed by up to three increases in 2019.
Her comments came as Beijing is scrambling to deal with a variety of tough issues, including the unprecedented trade war with Washington, a decade-low economic growth rate, the eroding confidence of private sector and market investors, and the resurfacing of capital outflow and yuan depreciation pressure.
The top Chinese leadership switched its policy focus to stabilising economic growth in July, including an easing monetary policy that is shrinking the gap between US and China interest rates.
