Yellen: Fed may hold back on raising interest rates

Published 12:00 am Wednesday, June 22, 2016

WASHINGTON — Weak economic growth in the United States could force the Federal Reserve to hold off on any imminent interest rate increases, the Federal Reserve chairwoman, Janet Yellen, told Congress on Tuesday.

While Yellen said that the U.S. economy’s long-term prospects remain favorable, she signaled that headwinds, including slower employment gains in recent months, weak productivity growth and the persistence of a sluggish pace of inflation have prompted the Fed to adopt a more cautious stance.

“The latest readings on the labor market and the weak pace of investment illustrate one downside — that domestic demand might falter,” Yellen said in testimony before the Senate Banking Committee.

Yellen’s overall message on Capitol Hill echoed her comments at a news conference last week after the Fed’s decision to hold rates steady. But her tenor suggested there was little chance of an increase in the benchmark federal funds rate at the central bank’s next meeting, in July, and that a move when policymakers meet again in September is hardly guaranteed.

“Proceeding cautiously in raising the federal funds rate will allow us to keep the monetary support to economic growth in place while we assess whether growth is returning to a moderate pace,” she said.

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