Fed will still raise rates despite ‘disappointing’ US jobs figures, says Janet Yellen

Janet Yellen

Janet Yellen said that “positive economic forces have outweighed the negative”, signalling that the Fed would have to increases interest rates before the year was out. She added that she expected “the economic expansion to continue, with the labour market improving further and GDP growing moderately”, reports The Telegraph.

The Fed chair admitted that the monthly US jobs report, published on Friday had been “disappointing”. May’s hiring figures were far weaker than had been expected by both policymakers and City analysts, with just 38,000 jobs added in the month.

Central bank watchers suggested that the data were bad enough to kill any hopes of an interest rate rise from the Fed this summer. Financial market pricing implies that there is no chance of a hike this month. Yet Ms Yellen emphasised “that one should never attach too much significance to any single monthly report”.

Overall, she argued that the “labour market situation has been quite positive”. She highlighted an “encouraging” rise in private sector earnings, and said that generally, “other timely indicators from the labour market have been more positive”.

Ian Shepherdson, a Pantheon Macroeconomics analyst, said that Ms Yellen’s comments were “clearly aimed at calming nerves, acknowledging the weakness of the May payroll report, but building a strong case for believing it will prove temporary”.



However, the Fed chair flagged the “less favourable possibility” that firms may have decided to cut back on hiring. She added that she would “pay close attention to developments in this area”.

Ms Yellen did not repeat her previous comment that a rate rise would be appropriate in the “coming months”. Investors do not expect the Fed to attempt a second rate rise until the end of the year, 12 months on from the central bank’s first increase in rates in nearly a decade.

Paul Ashworth, of Capital Economics, said that based on her speech, Ms Yellen “might still be in favour of a July rate hike, but it will require a bounce-back in June’s employment figures and a vote by the UK to remain in the European Union”.