News About Banking Industry

Yellen: Rate hike next month is ‘live possibility’

The Federal Reserve may be closer than ever to hiking interest rates for the first time in nearly a decade after Fed Chair Janet Yellen told Congress Wednesday that a move at its meeting next month is “a live possibility.” Yellen’s remarks came a day after leading Republican presidential candidate Donald Trump asserted that the Fed has kept rates low as a political favor to President Obama, a charge White House officials dismissed. With another GOP debate scheduled next Tuesday, the question of whether the Fed boosts rates at its final meeting before the 2016 election year could continue to serve as a political football despite the Fed’s status as an independent agency.janet-yellen-hearing2

The Dow Jones industrial average extended losses after Yellen began her testimony, falling as much as 80 points, before partly recovering later in the day. Although economic and job growth has slowed recently, Yellen told the House Financial Services committee the economy is performing well. But a decision on whether to hoist rates at the Fed’s Dec. 15-16 meeting will depend on economic reports in coming weeks, she said. Her comments put outsize significance on the government’s employment report Friday.  Payroll gains of around 200,000 could go a long way toward solidifying expectations for a rate increase while a total significantly below that would mark the third straight month of weak advances and could make the move unlikely.

Economists expect 182,000 employment gains, a total that Barclays Capital says would be enough to allay Fed concerns and raise the odds of Fed action. Economists expect the 5.1% unemployment rate to fall to 5%, which is close to full employment. Yellen said that if the economy advances as the Fed expects over the next six weeks, a rate increase next month “will be a live possibility.” She added, however, “No decision at all has been made on that.”