Global Weekly – Fed to move at a slower pace?

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Federal Reserve Chair Janet Yellen sounded more cautious on inflation during her testimony to Congress on Wednesday. Yellen’s subtle shift in tone raises the question if the US central bank will slow the expected pace of its interest rate hikes.

Although the Federal Reserve (Fed) on Wednesday seemed to stick to its base case that diminishing slack in the labour market would foster ‘a stronger pace of wage and price increases’, Yellen was a little more cautious about this prospect. She noted that there was ‘uncertainty about when – and how much – inflation will respond to tightening resource utilization’. This – together with the fact that core inflation has been running below target – explains why the Fed will be ‘monitoring inflation developments closely in the months ahead’.
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