The U.S. economy will continue to grow, albeit at a “balanced” pace, according to Janet Yellen, chairwoman of the Federal Reserve Board, who gave a speech earlier today at the Economic Club of Washington, D.C.
The speech was looked at as the clearest indication of whether the Fed will start raising interest rates when the Federal Open Markets Committee meets later this month. The FOMC sets the fed funds target rate, which is the interest rate that banks use when lending money to one another. It is a key benchmark rate used by banks when determining interest rates for consumer and business loan products, such as mortgages, credit cards, and auto loans. The fed funds rate has been at 0% for nearly seven years as the economy has recovered from the Great Recession.
Even though the unemployment rate has dropped from a high of 10% during the recession to 5% currently, Yellen pointed out that there are people who would be looking for jobs who are not doing so currently, which is keeping the rate artificially low, and the number of part-time workers who are seeking full-time work is still higher than its average rate.
But the wages of hourly workers is rising faster than it has in past years, which is a sign that the economy may be improving faster, Yellen pointed out during her remarks.
Yellen said she anticipates “continued economic growth at a moderate pace” during the next several years. In order to ensure that growth is not too rapid, Yellen said that the FOMC may consider keeping rates on the lower side for a longer period of time than expected to avoid any tightening of economic growth.
On balance, Yellen’s remarks should be a good sign for the industry. Economic growth means people and banks will have more money, both of which are important for the industry’s growth.
