Federal Reserve Janet Yellen said she has not yet reached a conclusion that the recently soft inflation data were an indication that it would fail to hit the Fed’s two percent target over time, and that the U.S. central bank was still bound to continue raising federal fund rates at a gradual rate.
Speaking before the Senate Banking Committee in Washington, the Fed chair said it was too early to deduce that the underlying inflation would not rise towards the central bank’s target.
The growth of the U.S. economy is on its ninth straight year and the labour market continues to add jobs without much improvement in inflationary pressures. The jobless rate was 4.4 percent in June and employers have created 187, 000 jobs based on a 12-month average. However, the stronger demand for labor has not been a driver of higher wages and three consecutive months of weak inflation data have prompted the Fed to call for a rate hike pause.
Addressing the tightness of the labor market, Yellen the economy may begin to see higher wages and prices as economic weakness narrows and calls the inflation risks “two-sided.”
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