Janet Yellen will leave expectations for a December interest-rate rise in place when she speaks publicly twice this week while drawing attention to what will happen to policy after liftoff.
The Federal Reserve chair “will be focused on the idea that December seems likely, but let’s get beyond the December hike and start talking about the pace” of rate increases that follow, said Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC in New York.
Yellen will give her outlook for the economy on Wednesday in a speech to The Economic Club of Washington. The following day she’s scheduled to testify before Congress’s Joint Economic Committee, an annual appearance on Capitol Hill, where she’ll deliver a statement and answer questions from lawmakers.
Yellen’s remarks will punctuate a week in which Fed policy makers have planned at least 12 public appearances, ushering financial markets toward the Dec. 15-16 session of the Federal Open Market Committee. The FOMC is widely expected to lift the benchmark federal funds target range above its near-zero setting, where it’s been held since December 2008, acknowledging declines in the level of U.S. unemployment and confidence among committee members that inflation will head back toward their 2 percent goal.
Economists and investors said they’ll be listening for additional clues about what will drive post-liftoff policy decisions, as well as for Yellen’s thoughts on risks to her economic outlook, including a steadily strengthening dollar and the divergence between monetary policies in the U.S. and other major economies.
Fed officials have emphasized they plan to tighten policy “gradually” after liftoff, in line with their expectations for further improvement in the economy, and that such moves will be data dependent. That raises questions that economists hope Yellen will address.
“What do they mean by data-dependency? What kind of guideposts will they be looking for in determining the subsequent hikes?” said Aneta Markowska, chief U.S. economist at Societe Generale SA in New York.
In recent months, the Fed has signaled that an initial hike hinged primarily on lowering unemployment, which is part of its dual mandate from Congress to seek stable prices and maximum employment.
With the U.S. jobless rate now at 5 percent, which lies at or very close to most policy makers’ estimates of full employment, the trigger for rate rises may shift to progress on inflation, said Alan Levenson, chief economist at investment manager T. Rowe Price Group Inc. in Baltimore.
“The closer we get to Dec. 16 the more important it will be to convey the message that while cumulative progress toward full employment has been the driver of this initial move, thereafter progress on the inflation side of the mandate is going to be more important,” Levenson said.