Interest Rates to Stay Low

Despite surprisingly good jobs numbers, the Fed will keep interest rates low for a "considerable period" beyond the end of quantitative easing.

Federal Reserve Chair Janet Yellen told lawmakers the central bank must press on with monetary stimulus as “significant slack” remains in labor markets and inflation is still below the Fed’s goal.

“A high degree of monetary policy accommodation remains appropriate,” Yellen said today in semi-annual testimony to the Senate Banking Committee. “Although the economy continues to improve, the recovery is not yet complete.”

“Economic activity will expand at a moderate pace over the next several years, supported by accommodative monetary policy, a waning drag from fiscal policy, the lagged effects of higher home prices and equity values, and strengthening foreign growth,” Yellen said.

A pickup in inflation toward the central bank’s 2 percent objective has also prompted some officials to say the Fed may have to consider tightening sooner. The Fed’s preferred gauge, the personal consumption expenditures index, rose 1.8 percent from a year earlier in May, the most in 19 months.

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