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Published: Sat, January 21, 2017
Economy | By Melissa Porter

Economy near full employment, Fed's Yellen says

Economy near full employment, Fed's Yellen says

- Janet Yellen, the Chair of the Federal Reserve, the nation's central bank, spoke to the Commonwealth Club Wednesday in San Francisco. "So where is the economy now, in relationship to them?"

She does not expect the economy to grow much more than 2% a year, far less that what the President-elect said he'll produce.

A key indicator of long-term euro zone inflation expectations, the five-year, five-year breakeven forward, was at 1.75 percent on Thursday morning, close to its one-year high of 1.77 percent at the start of the year.

Federal Reserve Chairman Janet Yellen delivers the semi-annual testimony on the "Federal Reserve's Supervision and Regulation of the Financial System" before the House Financial Services Committee in Washington, U.S., September 28, 2016.

More rates hikes loom, including multiple potential increases during 2017.

There's also plenty of U.S. economic data on the docket with housing starts, jobless claims and the Philadelphia Fed business survey all scheduled for release.

The FED Chairperson also mentioned that the economy is near its maximum employment level and the inflation is also on its right track.

While Yellen did not mention Trump or other Republicans who have criticized the Fed, she noted that an independent central bank is best for the USA economy. The ECB held interest rates at zero and kept the deposit rate at -0.4%.

The 3 percent level for the Fed's target for the federal funds rate, the interest that banks charge each other, is the point that the Fed now believes is the so-called neutral rate - the level where the Fed's interest rate policies are not spurring growth or holding it back. She said that future alterations in fiscal policy were just one of the many uncertainties that the Fed would have to grapple with as it plots its monetary moves in the months ahead.

In her remarks, Yellen said that economics training can play an important role in improving the capabilities and creativity of the workforce.

A 3 percent interest rate would mean the bank may raise rates at least nine more times, if by 25 basis points each time, to meet that goal in the next three years.

"Yellen's comments reinforced the message that we have been getting from other Fed speakers that the economy is already strong even before the addition of any stimulus from Trumponomics", said Greg McKenna, chief market strategist at FX and CFD provider AxiTrader.

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