On Wednesday, December 2, the chair of the Federal Reserve, Janet Yellen, delivered a speech on economic prospects in Washington.
The Dollar to Euro Rate Hit a High During Yellen’s Speech
Notably, against the backdrop of the Fed Chair’s comments, the EUR/USD pair fell to its lowest level since April 2015, reaching 1.055.
In her speech, Yellen stated that she is confident in the U.S. economy’s outlook ahead of the December meeting and expects further economic growth and labor market strengthening.
Increased employment, according to the Fed Chair, further confirms the forecast of achieving the inflation target of 2%. Inflation concerns could only arise from a sustained drop in long-term inflation expectations. Current inflation rates, according to Yellen, are between 1.5% and 1.75%.
External risks have somewhat stabilized compared to the end of summer. The Fed Chair noted that China has increased stimulus measures and is capable of increasing them if needed.
Temporary factors such as low oil prices and a strong U.S. dollar over the next two years will reduce their negative impact on the economy. The decline in oil prices will lessen its effect on inflation by 2016.
Moreover, Yellen made an important statement that delaying the rate hike would result in a sharp increase in the future, increasing the risk of recession. All of this suggests the beginning of the process of normalizing the Fed’s monetary policy in December 2015.
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FAQ
What did Janet Yellen say about the U.S. economy?
Janet Yellen expressed confidence in the U.S. economy’s outlook and expected further economic growth and labor market strengthening.
How did Yellen’s speech affect the dollar?
Yellen’s speech caused the dollar to hit a high against the euro, with the EUR/USD pair falling to its lowest level since April 2015.
What does Yellen mean by delaying rate hikes?
Yellen warned that delaying rate hikes could lead to a sharp increase in the future, increasing the risk of recession.
