Janet Yellen offers few clues to rate hike timetable in Jackson Hole speech

The U.S. central bank may be getting closer to raising its benchmark interest rate, but the woman who heads it up stopped well short of giving a firm timeline for doing so in a speech in Jackson Hole, Wyo., on Friday.

"In light of the continued solid performance of the labour market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months," Janet Yellen said in a speech at the Federal Reserve's annual forum.

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The central bank shocked markets with a sudden rate hike last December, an action that was followed by a slew of bad news for the global economy, so the bank backed off raising them again for much of the year. But many within the bank still think another hike is warranted at some point.

Yellen's speech Friday was closely parsed for hints to which way the Fed was leaning, but the text of her remarks was very careful to not commit to a timeline.

Future rate increases should be "gradual," Yellen said according to a copy of her prepared remarks.

Investors currently thinks there's a one in five chance that the Fed will raise rates at its next policy meeting, in September, and it's even money that they will do so at the next one, in December.

"There was no comment on timing except that there was no timing," said Mark Grant, managing director of Hilltop Securities. "I think September is an impossibility with the elections looming. The Fed does not want to take any heat if things go badly."

Lone view

Some of Yellen's colleagues, including the host of the forum — Esther George, head of the Federal Reserve Bank of Kansas City — have suggested that the time is ripe for the Fed to resume raising rates. Other Fed officials, including several close to Yellen, have favoured a more cautious approach.

George said Thursday that if the outlook for the economy unfolds as she expects, she would vote for a rate hike at the Fed's next policy meeting, Sept. 20-21.

George has cast a lone dissent at three meetings this year in favour of higher rates and may be gaining support for her view. But the big question is where Yellen herself stands. Her speech Friday may help settle that question — at least for the moment.

Yellen has stressed repeatedly that the Fed's outlook for rates depends on the most recent economic data and not on any preset timetable.

Fed leaders have at times used the Jackson Hole event to announce major policy shifts. In 2010, for example, Chairman Ben Bernanke signaled that the Fed was considering a new round of bond purchases to try to help a struggling economy emerge from the wreckage of the Great Recession. The Fed's purchases were intended to shrink long-term loan rates to spur borrowing and spending.

Some economists say they think Yellen will alert investors Friday that the central bank might be inclined to act in September.

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