Yellen Points to Slow Growth and Low Rates in the Long Run

Federal Reserve Chairwoman Janet Yellen came to acknowledge that low interest rates could be the new long-run state of the U.S. economy.

Fed officials will meet next time from July 26th to 27th. The chairwoman gave no indication that she expects to move rates up at that time. The officials concern that uncertainties and risks, such as low job growth rate will hold back economic growth.

“Considerable uncertainty about the economic outlook remains,” Ms. Yellen said in five pages of prepared testimony. “Consumer spending and investment could falter”. “We cannot rule out the possibility expressed by some prominent economists that slow productivity growth seen in recent years will continue into the future,” she said.

In recent public appearances, the Fed officials maintained short-term interest rates steady between 0.25% and 0.5%. The Chairwoman held her concerns about long-run impediments to growth which doesn’t put the Fed in the position to step in affecting interest rate policies.

Ms. Yellen also mentioned the threats to the British referendum. “A U.K. vote to exit the European Union could have significant economic repercussions,” she said.

The polls on “Brexit” is too close to call two days before the vote. A poll for the Financial Times Tuesday showed “Leave” at 45 percent and “Remain” at 44 percent.

The unknown is a big part of the challenge. The U.K. market has closely tied to that of the U.S. and is now the second-largest economy in Europe. This would affect the influence of U.S. on Europe through its traditional close relationship with Britain.

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