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| US stock prices hold steady as Fed suggests likely rate increase by end of year | US stock prices hold steady as Fed suggests likely rate increase by end of year |
| (35 minutes later) | |
| US stock prices held steady on Wednesday as the Federal Reserve chair, Janet Yellen, again suggested there would be an interest rate increase by the end of the year, while the euro fell ahead of a Greek government vote on whether to accept tough terms for a vital third bailout. | US stock prices held steady on Wednesday as the Federal Reserve chair, Janet Yellen, again suggested there would be an interest rate increase by the end of the year, while the euro fell ahead of a Greek government vote on whether to accept tough terms for a vital third bailout. |
| Oil prices fell on worries of growing supply from Iran following a landmark deal that would lift sanctions that have curbed its oil sales for several years. | Oil prices fell on worries of growing supply from Iran following a landmark deal that would lift sanctions that have curbed its oil sales for several years. |
| “If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate,” Yellen said in a testimony prepared for a US House panel. | “If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate,” Yellen said in a testimony prepared for a US House panel. |
| According to Yellen, the Federal Reserve is keeping an eye on the situation in Greece as well as the stock market turmoil in China. On Tuesday, China surpassed expectations when its gross domestic product rose by 7%. | According to Yellen, the Federal Reserve is keeping an eye on the situation in Greece as well as the stock market turmoil in China. On Tuesday, China surpassed expectations when its gross domestic product rose by 7%. |
| The going-ons in Greece and China “are not new”, Yellen said on Wednesday, indicating that the situation abroad had yet to force the Federal Reserve to reconsider its plan to raise interest rates later this year. | The going-ons in Greece and China “are not new”, Yellen said on Wednesday, indicating that the situation abroad had yet to force the Federal Reserve to reconsider its plan to raise interest rates later this year. |
| Yellen also said while the Federal Reserve was monitoring the situation in Puerto Rico, it was up to Congress to determine what should be done about the US commonwealth’s $73bn debt. | Yellen also said while the Federal Reserve was monitoring the situation in Puerto Rico, it was up to Congress to determine what should be done about the US commonwealth’s $73bn debt. |
| Related: Puerto Rico in crisis: weighed down by $73bn debt as unemployment hits 14% | Related: Puerto Rico in crisis: weighed down by $73bn debt as unemployment hits 14% |
| Economists reckoned the US central bank would probably end its near-zero rate policy in September, while traders bet such a move would occur in December. | Economists reckoned the US central bank would probably end its near-zero rate policy in September, while traders bet such a move would occur in December. |
| While a Fed “lift-off” raises domestic borrowing costs, the expected slow pace of rate normalization shouldn’t cut much into corporate profits, analysts said. | While a Fed “lift-off” raises domestic borrowing costs, the expected slow pace of rate normalization shouldn’t cut much into corporate profits, analysts said. |
| “The Fed just wants to catch up with it and get to more normalized levels,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York. | “The Fed just wants to catch up with it and get to more normalized levels,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York. |
| Yellen did warn that the Federal Reserve would not raise interest rates if such a hike would tip the US economy back into recession. She said that at this point, the Federal Reserve has no judgment about “the appropriate date to raise the federal funds rate”. | Yellen did warn that the Federal Reserve would not raise interest rates if such a hike would tip the US economy back into recession. She said that at this point, the Federal Reserve has no judgment about “the appropriate date to raise the federal funds rate”. |
| “If we wait longer [to raise rates] it certainly could mean that when we begin to raise rates we might have to do so more rapidly,” she warned. “So an advantage to beginning a little bit earlier is that we might have a more gradual path of rate increases.” | “If we wait longer [to raise rates] it certainly could mean that when we begin to raise rates we might have to do so more rapidly,” she warned. “So an advantage to beginning a little bit earlier is that we might have a more gradual path of rate increases.” |
| In addition to fielding questions about the potential interest rate hike, Yellen spoke about the minimum wage and minority unemployment. When asked by Wisconsin congresswoman Gwen Moore if raising the minimum wage would be good for the economy, Yellen said: “That’s for Congress to sort out.” | |
| Over the past year, average hourly earnings have increased by little over 2%, but experts say that has mostly gone toward wages for upper-level management and other high earners. In order for low-income American to feel the effects of economic recovery, wages would have to grow by on average 3% to 4%, which would give more of a real-terms boost to low earners. | |
| Yellen said that she was greatly concerned with rising inequality and the impact it had on African Americans and their unemployment, but that there was little she could do about it. | Yellen said that she was greatly concerned with rising inequality and the impact it had on African Americans and their unemployment, but that there was little she could do about it. |
| “We don’t have the tools to be able to address the structure of unemployment across groups, but a stronger economy generally really does tend to be beneficial to all Americans and that’s what we are working towards,” she said. | “We don’t have the tools to be able to address the structure of unemployment across groups, but a stronger economy generally really does tend to be beneficial to all Americans and that’s what we are working towards,” she said. |
| Reuters contributed to this report |