Janet Yellen, “Makes sense to raise rates gradually.”

Janet Yellen, “Makes sense to raise rates gradually.”

Janet Yellen, “Makes sense to raise rates gradually.”

$DIA, $SPY, $QQQ, $VXX

With the US economy close to full employment and inflation headed toward the Fed’s 2% goal, it “makes sense” for the US central bank to gradually lift interest rates, Fed Chairwoman Janet Yellen said Wednesday afternoon.

“Waiting too long to begin moving toward the neutral rate could risk a nasty surprise down the road; either too much inflation, financial instability, or both,” Ms. Yellen said in remarks prepared for delivery to the Commonwealth Club of California in San Francisco.

The Fed raised short-term interest rates last month for only the 2nd time since the Y 2007-2009 financial crisis, when it slashed rates to near Zero and began buying massive amounts of US Treasuries and mortgage-backed securities to push down long-term borrowing costs.

The rate rise last December reflected confidence the economy will continue to recover, Ms. Yellen said.

That pace could change depending on how the outlook for the economy develops, Ms. Yellen cautioned.

“The economy is vast and vastly complex, and its path can take surprising twists and turns,” she said.

She did not make any comments on the incoming Trump Administration.

 Friday, Republican businessman-turned-politician Donald Trump, who will be sworn in as US President, has promised tax cuts, regulatory rollbacks and infrastructure spending that he says will boost economic growth.

Other Fed policymakers have suggested fiscal stimulus, with the unemployment rate now at a healthy 4.7%, could lead to a faster pace of rate hikes than currently anticipated.

The US  economy is “close” on both its employment mandate and its inflation goal, Ms. Yellen said. But, she added, “our foot remains on the pedal in part because we want to make sure the economic expansion remains strong enough to withstand an unexpected shock, given that we don’t have much room to cut interest rates.”

“Nevertheless, as the economy approaches our objectives, it makes sense to gradually reduce the level of monetary policy support.

Wednesday, the major US stock market indexes finished at: DJIA -22.05 at 19804.85, NAS Comp +16.93 at 5555.65, S&P 500, +4.00 at 2271.89

Volume: trade on the NYSE came in just below average at 913-M/shares exchanged

  • Russell 2000 -0.3% YTD
  • DJIA+0.3% YTD
  • S&P 500 +1.3% YTD
  • NAS Comp +2.9% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.26) Neutral (-0.06) Bullish (0.29) Very Bullish (0.56)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Bullish (0.31) Neutral (0.16) Bullish (0.42) Bullish (0.35)
HeffX-LTNAnalysis for QQQ: Overall Short Intermediate Long
Bullish (0.49) Bullish (0.34) Very Bullish (0.59) Very Bullish (0.53)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Very Bearish (-0.51) Bearish (-0.47) Very Bearish (-0.71) Bearish (-0.36)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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