"And so even when the headwinds have diminished to the point where the economy is finally back on track and it's where we want it to be, it's still going to require an unusually accommodative monetary policy"
- Janet Yellen, Fed Chair
Federal Reserve Head Janet Yellen will testify before the Congress Tuesday and Wednesday about America's economic performance and future central bank's policy. Yellen will be under pressure to acknowledge an increase in inflation and labour market strength, meaning a significant shift in tone towards a more hawkish rates outlook can be expected. Economists, however, see Yellen reiterating that the path of interest rates depends on the nation's economy health during an uncertain period. Moreover, Yellen believes that the Fed will still need to stick to accommodative monetary policy even when the U.S. economy returns back on track.
Employment gains have increased noticeably this year bringing the jobless rate to 6.1%, even while broader economic growth has been disappointing. Meanwhile, the inflation gauge, which the Fed monitors closely, has climbed to an annual 2% target. The strengthening labour market has urged the central bank to start gradually tapering monthly bond purchases aimed at boosting economic activity, with quantitative easing expected to end in October 2014. Also, interest rate forecasts of Fed suggests the first rate hike could come in the mid of 2015, but some economists argue that accelerating inflation will force the central bank to increase rates early next year.
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