On Nov. 4, Janet Yellen, the chairwoman of the Federal Bank, gave some signals that an increase in interest rates could come in December in her testimony before Congress. “At this point, I see the U.S. economy as performing well” and that “December would be a live possibility”, said Ms. Yellen.
Since December of 2008, the Fed has kept its benchmark interest rate at a range between zero and twenty-five percent. The move was announced during the Great Recession when in the same month of December, the government announced the United States economy shrank by 533,000 jobs in the previous month of November. It was the largest one-month loss since 1974; later revised to an even greater loss of 765,000 jobs.
Expected action will take place on Dec. 16th when the Federal Open Market Committee, the policy-making group within the Fed that sets the target interest rate, concludes its two-day meeting. Ms. Yellen is scheduled to hold a news conference following the meeting that afternoon where an announcement will be made.
An unexpectedly strong October jobs report, released in early November, has given investors a strong signal that the economy is healthy, warranting a hike in interest rates in December. The economy stands at “full employment”, or at an unemployment rate of 5 percent which is considered by many economists as the lowest rate of unemployment disregarding frictional and structural unemployment.
Signs of global economic instability such as the slowing Chinese economy, the slumping price of oil, and the downturns in the global stock markets gave many second thought to the decision if it will in fact be the best time for the Federal Bank to raise rates. The growth in job rates has reassured many with worries generated by the turmoil in the global economy.
Ms. Yellen delivered a message to the optimist as well. In her testimony to Congress a few weeks earlier, the chairwoman spoke with caution, “no decision has been made.”