Yellen Suggests Fed May Delay Rate Rises, Not Abandon Them

Federal Reserve Chair Janet Yellen suggested that the central bank might delay, but not abandon, planned interest-rate increases in response to recent turmoil in financial markets.

In presenting the Fed’s semi-annual economic report to Congress, Yellen said the turbulence had "significantly" tightened financial conditions by pushing down stock prices, pushing up the dollar and raising some borrowing costs.

Policy makers provisionally penciled in four quarter percentage point rate increases for 2016 when they hiked borrowing costs in December for the first time since 2006.

The financial markets since then have been rocked by a series of shocks, from a depreciation of China’s currency to a steep fall in oil prices, that raised concerns among investors about the outlook for the world economy.

In spite of the big moves in the markets, Yellen said she hasn’t seen a steep drop-off in economic growth, either in the U.S. or globally. "Recent economic indicators do not suggest a sharp slowdown" in China, she added.

She forecast that the American economy would bounce back this quarter after slowing in the final three months of 2015 and said she expects wage gains to accelerate now that unemployment has fallen to an eight-year low.

The Fed chair said the policy-making Federal Open Market Committee continues to see the next move in interest rates as up, rather than down. "I do not expect the FOMC is going to be soon in a situation where it’s necessary to cut rates," she said.