On Monday, Federal Reserve Chairwoman Janet Yellen said the disappointing May employment report has raised significant questions about the economic outlook that will weigh on officials as they determine when to raise short-term interest rates. Thus, Ms. Yellen dropped previous assurances that she expected the central bank to raise its benchmark interest rate “in the coming months” in Monday speech.
“The uncertainties are sizable, and progress toward our goals and, by implication, the appropriate stance of monetary policy will depend on how these uncertainties evolve,” Ms. Yellen said in remarks prepared for delivery at the World Affairs Council of Philadelphia.
“Indeed, the policy path that my colleagues and I judge most likely to achieve and maintain maximum employment and price stability has evolved and will continue to evolve in response to developments that alter our economic outlook and the associated risks to that outlook,” she said.
Investors have all but written off the chances the Fed will raise rates at its next meeting, which is June 14 and 15, and Ms. Yellen did not try to change their minds. Her speech is the last scheduled public appearance by a Fed official before the meeting.
Ms. Yellen was careful to insist, however, that one bad jobs report had not caused the Fed to scrap its plans entirely, leaving open the prospect that the central bank still could decide to raise rates at meetings in July or September.
She said that she remained optimistic that the economy would continue to grow.
“If incoming data are consistent with labor market conditions strengthening and inflation making progress toward our 2 percent objective, as I expect, further gradual increases in the federal funds rate are likely to be appropriate,” she said in an advance copy of her remarks to the World Affairs Council of Philadelphia.
Fed officials could choose to raise interest rate in July, but they will have only six weeks of economic data between meetings to assure them that the economy is still on track.