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Bonds News

HIGHLIGHTS-Fed chief Yellen's news conference after FOMC meeting

WASHINGTON, June 15 (Reuters) - The following are highlights from Federal Reserve Chair Janet Yellen’s press conference on Wednesday following the end of a two-day meeting of the U.S. central bank’s policy-setting committee.

ON GROWTH PICKING UP

“Indicators for the second quarter have so far pointed to a sizable rebound. This recovery is a key factor supporting the committee’s expectation that overall economic activity will expand at a moderate pace over the next few years.”

ON NEUTRAL RATE

“As I said, we have good reason to believe that the so-called neutral rate or rate compatible with the economy operating at full employment is low at the present time and many of us believe as a base case it’s reasonable to assume that those rates will move up over time. But we’re not certain of that. It is one of the uncertainties and there could be revisions in either direction but thus far in recent SEPs I’d say the revisions have mainly been in the downward direction.”

ON FOREIGN MONETARY POLICY NOT BEING A CONSTRAINT ON FED

“The state of foreign economies, both their growth outlooks and the stance of monetary policy, those are factors that influence the U.S. outlook and influence the appropriate stance of monetary policy....

“So it is certainly relevant to the stance of U.S. monetary policy and a factor, but when one says ‘a constraint,’ I really would not go so far as to say it is a constraint on monetary policy.”

ON WAGE GROWTH

“I would take somewhat faster wage increases to be a sign that labor market slack is diminishing, and that the labor market is approaching conditions that are consistent with maximum employment. I think we have seen some hints, perhaps preliminary indications, that wage growth is picking up. And as much as anything I think it’s a sign of a generally healthy labor market, which is what our mandated objective is to achieve maximum employment. So it would be a symptom of it.”

ON NO TIMETABLE FOR RATE HIKE; JULY ‘NOT IMPOSSIBLE’

“We do need to make sure that there is sufficient momentum (in order to raise rates). I don’t know what the timetable is going to be to gain that assurance. Every meeting is live. There is no meeting that is off the table. No meeting is out in terms of a possible rate increase. But we really need to look at the data and I can’t pre-specify a timetable so I’m not comfortable to say it’s in the next meeting or two but it could be. It could be. It’s not impossible. It’s not impossible that by July for example we would see data that led us to believe that we are on a perfectly fine course, and that data was an aberration and that other concerns would have passed.”

ON POLICY AND THE UPCOMING ELECTIONS

“We are very focused on assessing the economic outlook and making changes that are appropriate without taking politics into account.

“Look, if the incoming data were in the coming months to justify the find of gradual increases that we have long discussed that we see as appropriate in light of the outlook, I think markets should not be surprised by such a decision if we make it and it’s obviously consistent with the data that we’ve seen. The committee will feel free to move in the coming months if we think it’s appropriate.

ON THE JOBS MARKET

“The state of the labor market is still healthy but there’s been something of a loss of momentum ... Exactly what the reasons are for that slowing, it’s hard to say....We should not overblow the significance of one data point, especially when other indicators of the labor market are still flashing green...The committee doesn’t feel and doesn’t expect, and I don’t expect, that labor market, progress in the labor market has come to an end.”

ON OUTLOOK AMID INTERNATIONAL, LABOR MARKET UNCERTAINTIES

“The (policy-making) committee as a whole never discusses how many increases should we have this year or next year. That’s not a decision we’re making as a committee. We’re making decisions on a meeting-by-meeting basis and trying to give a sense to the public of what we’re looking for and what the basis of a decision will be. And as I indicated first of all international uncertainties loom large here. We mentioned Brexit, the UK decision, obviously how that turns out is something that will factor into future decisions. We’re also looking at the prospects for economic growth and continued progress in the labor market.”

ON THE OUTLOOK, ON EVERY MEETING BEING ‘LIVE’

“I have to say with respect to the slowdown we saw in consumer spending, that seems to be out of line with fundamentals. We expected it to pick up and we’ve seen very good evidence that it has picked up. But now the labor market appears to have slowed down and we need to assure ourselves that the underlying momentum in the economy has not diminished. So as I said, we will be carefully assessing data on the labor market to make sure that job gains are going to continue at a pace sufficient to result in further improvement in the labor market, and we will be watching the spending data to make sure that growth is picking up in line with our expectations.

Every meeting is live and we could make a decision at any meeting to adjust the funds rate but that’s the kind of thing that we will want to see to make such decisions.”

ON BREXIT

“Brexit...is something we discussed and I think it’s fair to say that it was one of the factors that factored into today’s decisions.

“Clearly this is a very important decision for the United Kingdom and for Europe. It is a decision that could have consequences for economic and financial conditions in global financial markets. If it does so it could have consequences in turn for the U.S. economic outlook that would be a factor in deciding on the appropriate path of policy. It is certainly one of the uncertainties that we discussed and that factored into today’s decision.”

ON POLICY CAUTION

“Proceeding cautiously and raising our interest-rate target will allow us to verify that economic growth will return to a moderate pace, that the labor market will strengthen further and that inflation will continue to make progress toward our 2 percent objective. Caution is all the more appropriate given that short-term interest rates are still near zero, which means that monetary policy can more effectively respond to surprisingly strong inflation pressures in the future than to a weakening labor market and falling inflation.”

ON LABOR MARKET SLOWDOWN

“More recently the pace of improvement in the labor market appears to have slowed markedly. Job gains in April and May are estimated to have averaged only about 80,000 per month... While the recent labor market data have on balance been disappointing, it’s important not to overreact to one or two monthly readings. The committee continues to expect that the labor market will strengthen further over the next few years. That said, we will be watching the job market carefully.”

Reporting by Lucia Mutikani, Ann Saphir and Jonathan Spicer; Editing by Andrea Ricci

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