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Investors to Seek Hint on Rate Hikes   08/26 06:34

   When Janet Yellen steps to the microphone Friday morning at an annual 
central bank forum in Jackson Hole, Wyoming, investors will be listening for 
one thing above all: Any hint of the Federal Reserve chair's expected timetable 
for the next interest rate increase.

   WASHINGTON (AP) -- When Janet Yellen steps to the microphone Friday morning 
at an annual central bank forum in Jackson Hole, Wyoming, investors will be 
listening for one thing above all: Any hint of the Federal Reserve chair's 
expected timetable for the next interest rate increase.

   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 favored 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.

   "As I look at the data and the economy and the progress that has been made, 
I judge that we are nearing full employment," George said in an interview on 
Fox Business Network. "In the interest of long-run sustainable growth, we 
should be raising rates gradually."

   George has cast a lone dissent at three meetings this year in favor 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.

   In addition to George, two close Yellen allies --- William Dudley, president 
of the Federal Reserve Bank of New York, and Stanley Fischer, the Fed's vice 
chairman --- have suggested in the past week that a strengthening economy will 
soon warrant a resumption of the rate hikes the Fed began in December. That was 
when it raised its benchmark lending rate from near zero, where it had been 
since the depths of the financial crisis in 2008.

   Dudley said in an interview last week that he believes "we're edging closer 
towards the point in time where it'll be appropriate to raise interest rates 
further."

   And in a speech Sunday, Fischer said the Fed was getting "close to our 
targets," including being "within hailing distance" of the Fed's 2 percent goal 
for inflation.

   Many analysts, including David Jones, chief economist at DMJ Advisors, said 
the recent remarks by Fed officials could be seen as increasing the likelihood 
of a September rate hike. But others say December remains in their view the 
more likely time for a resumption of rate increases.

   Diane Swonk of DS Economics suggested that one reason U.S. stock averages 
set highs so soon after Britain's June vote to leave the European Union 
escalated global economic fears is a belief that the Fed will leave rates alone 
until perhaps year's end.

   "Investors are not pricing in a Fed tightening," said Swonk, who expects the 
Fed to take no action until January.

   The theme of this year's conference is "Designing Resilient Monetary Policy 
Frameworks for the Future," a nod to the tough environment the Fed faces. 
Inflation and economic growth remain stubbornly low, even with all the support 
the central bank has given the economy since the 2008 financial crisis and the 
Great Recession.

   In advance of Yellen's speech Friday, George, Fischer and eight other Fed 
officials met Thursday with about 120 activists from the Campaign for Popular 
Democracy's Fed Up coalition. The group of policy activists, labor unions and 
community groups has been lobbying the Fed since 2014 to keep rates low to 
allow the economy to strengthen enough to benefit more Americans.

   "We asked the Fed presidents to keep distressed communities in mind when 
they make their interest-rate decisions," said Dan Crawford, a spokesman for 
the liberal Economic Policy Institute, one of the groups in the coalition.

   The group, wearing green T-shirts bearing the slogan, "We Need a People's 
Fed," posed questions about economic policy and the need for diversity to the 
Fed officials who took part in the hour-long discussion.

   "They all agreed the Fed needs to do a better job on diversity," said Ady 
Barkan, campaign director for the Fed Up coalition. "It was a substantive 
conversation, and they said they would consider our proposals."

   The coalition wants the Fed and Congress to consider changes in the makeup 
of the boards of directors of the 12 regional banks to promote more diversity 
among a group of officials that is mainly white and male and dominated by 
bankers.


(KA)

 
 
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