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Yellen Maintains Neutral Approach During Press Conference As Uncertainty Remains

By Kitco News
Wednesday June 18, 2014 4:47 PM

(Kitco News) - Federal Reserve Chair, Janet Yellen maintained a middle-of-the-road approach to expectations for higher interest rates and stronger economic growth.

Yellen emphasized several times during her press conference Wednesday, following the release of the Federal Open Market Committee’s monetary policy statement, that the committee is not on a pre-set course and interest rates will be determined by the strength of the U.S. economy.

“There is an uncertainty for short-term interest rates and that is natural because there is uncertainty in economic growth,” she said during the question period.

Yellen struck a relatively optimistic tone during her press conference. As noted in the projections released after the Fed’s monetary policy, Yellen reiterated that the Fed sees a rise in economic growth coupled with an improving labor market and a gradual rise in inflation expectations.

When asked if the rise in annual CPI inflation to 2.1% and core inflation at 2.0% is a concern as the data meets the Fed’s inflation target, Yellen responded by saying that although the inflation data was on the higher side the committee sees a lot of “noise” in the data. She added that they still see inflation evolving within their outlook.

Yellen also fielded questions about the recent low volatility in the current marketplace. The Fed does not have a target level of volatility, she said; however it is not a scenario the central bank likes as it can increase risky behavior, she added.

Yellen commented that the committee is closely watching the recent increase in higher-yielding and high-risk investments. She said that there does appear to be a “reach for yields.” Yellen added she doe

Yellen was also optimistic about the state of the equity markets. Although the Standard and Poor’s 500 stock index continues to reach record highs, she said she still doesn’t see signs of a bubble as prices have not risen above relative normal valuations.

When asked if the U.S. will be stuck in a period of lower growth, Yellen said that there are several factors that point to an improving economy: better household balance sheets, rising home prices, an improving labor market and a brighter global economy.

“I think there are many reasons why we should see above-trend growth in 2015 and 2016,” she said.


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By Neils Christensen of Kitco News; nchristensen@kitco.com

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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