Yellen Left Door Open for Rate Increase After July, Allianz Says

Is Risk Where the Opportunities Are in the Markets?
  • Federal Reserve Chair’s speech set ‘good tone,’ Hooper says
  • Monetary policy exhaustion poses greatest risk in medium term

Janet Yellen held out the possibility of rate increases after July in her speech last week, according to Kristina Hooper, a U.S. investment strategist at Allianz Global Investors in New York.

QuickTake Behind the Fed Rate Watch

The Federal Reserve Chair “set a very good tone in that she pulled it back a little in terms of expectations,” Hooper said Tuesday in a Bloomberg Television interview. “I think she left the door open for rate hikes beyond July.”

Federal Reserve policy makers indicated at their meeting in April that a June interest-rate increase was likely if the economy continued to improve, boosting market expectations they will act at their meeting in mid-June.

A rate increase would be appropriate “probably in the coming months” if the economy and labor market continue to strengthen, Yellen said in a speech Friday at Harvard University, noting the central bank would “cautiously” increase rates.

Exhaustion from monetary policy easing may prove the biggest challenge in coming years even as markets contend with short-term risks caused by China, Hooper said.

“We’re getting close and that seems to be one of the reasons the Fed is talking up the possibility of a June or July rate hike,” she said.

Allianz Global Investors is part of Munich-based insurer Allianz SE’s asset-management operations.

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