Get all your news in one place.
100’s of premium titles.
One app.
Start reading
The Guardian - UK
The Guardian - UK
Business
Graeme Wearden (until 1.15) and Nick Fletcher

Fed chair Yellen hints at summer US rate rise but urges caution – as it happened

Federal Reserve Chair Janet Yellen, who returns to Harvard today
Federal Reserve Chair Janet Yellen, who returns to Harvard today Photograph: Kevin Lamarque/Reuters

So there you have it and the traders from New York can now go off to the Hamptons.

While not specifically mentioning a June rise, she did say it would probably be appropriate for the Federal Reserve to gradually raise rates in the coming months. But she urged caution and warned of hiking rates too steeply.

As a consequence the dollar has moved higher.

On that note, it’s time to close for the evening. Thanks for your comments, and we’ll be back next week.

Yellen: need to be cautious on rate rises

And now the key question. She is told that a New York money brokers are delaying their weekend trip to the Hamptons to see if she says anything market moving. So here is her chance to move markets (laughter) so can she say anything about the path of monetary policy?

Yellen: The economy is continuing to improve, we saw weak growth in first quarter of year. It looks to be picking up from data we monitor... We will monitor incoming data and risks.

It’s appropriate for the Fed to gradually and cautiously increase our overnight interest rate over time. In coming months such a move would be appropriate.

On negative interest rates, we considered it briefly. There could be a number of negative repercussions so we didn’t pursue it and it’s not something we are thinking about now. But other countries are using it. So we have to be cautious.

If we were to raise interest rates too quickly and we trigger a downturn we have limited scope to respond. We should be cautious about raising rates too steeply.

On the economy, she says it has been a slow recovery but we have made a great deal of progress. We have created 14m new jobs since lowest point for employment.

We’ve made a lot of progress. That said, further gains are possible, we’ve not seen much improvement in wage growth.

But the growth of output has been remarkably slow. We have a lot of jobs being created in the face of not much output, so that means productivity growth is quite slow.

With respect to inflation, it has been running below the Fed’s 2% objective for a number of years.

There are a number of reasons, the plunge in oil price, a marked depreciation of the dollar pushing down import prices.

These seem to have stablised, and if we continue to see stability, inflationwill move over next couple of years to near target.

Yellen says they are trying to be better at spotting financial instabilities, and they have a better process for doing that.

Updated

Yellen is praising her predecessor Ben Bernanke for being brave during the financial crisis, but she admits they did not see the crisis coming.

Bloomberg has a better feed here.

Yellen
Yellen Photograph: Bloomberg TV

Janet Yellen is now on stage at the Radcliffe Institute where the chair of the Federal Reserve is being given the Radcliffe Medal, “presented annually to an individual who has had a transformative impact on society.”

Janet Yellen
Janet Yellen Photograph: Radcliffe Institute

Of course the big interest is what - if anything -she might say about a June rate hike, given the suggestions from a number of Fed members in recent days that such a move may be on the cards.

At the moment she is being asked about her background and general comments about economics.

A link to the discussion (albeit a bit sporadic) is here.

The Russian president Vladimir Putin was quick to stamp the tone on his two-day visit as he begun talks with the Greek prime minister Alexis Tsipras, reports Helena Smith:

“In Moscow and St Petersburg we have discussed our prospects of economic collaboration in detail. Of course there are many problems and times are difficult but for sure there are good prospects,” said Putin. “We have to transform the good relations of [our] two peoples into tangible economic results.”

Greece and Russia, fellow Orthodox states, with a common heritage that goes back to Byzantium have hailed 2016 to be a “year of Greek-Russian friendship.”

Putin, who is travelling with nine ministers, is expected to sign an array of agreements with Athens’ leftist-led government. Energy and tourism are expected to be high on the agenda. Tourist-dependent Greece is hungry for Russian holiday makers and industry figures have complained bitterly about the slow pace with which visas have been made available to them by the Greek state machinery - not least diplomatic services in Russia itself.

Putin and Tsipras.
Putin and Tsipras. Photograph: Mikhail Svetlov/Getty Images

Athens’ governing left wing Syriza party has spoken stridently about the need to create a “multi-faceted” foreign policy - one which will see the country furthering relations with China, Russia, Iran and Latin America.

“We are trying to open up what used to be a very narrow western looking diplomatic attidude,” the country’s culture minister Aristides Baltas, a leading Syriza ideologue, told me.

“We want to remain in Europe but not in the sense of being the obedient servants of the west,” he said, adding that Greece, as an EU member state, had been obliged to follow the embargo against Russia even if didn’t agree with it.

Back in Greece and words of welcome for president Putin from the country’s prime minister:

As for Putin himself:

European markets quiet ahead of weekend

There’s no disguising the fact it was a pretty quiet day all round on European stock markets as the week drifted to a close. With investors unwilling to commit themselves ahead of comments from US Federal Reserve chair Janet Yellen later - albeit there is little expectation of any real hints on interest rates - there was little to disturb the horses. Even the upward revision to US first quarter GDP passed without much impact. So the final scores showed:

  • The FTSE 100 finished up just 5.14 points or 0.08% at 6270.79
  • Germany’s Dax was virtually unchanged, edging up 0.13% to 10,286.31
  • France’s Cac closed 0.05% ahead at 4514.74
  • Italy’s FTSE MIB dipped 0.17% to 18,186.14
  • Spain’s Ibex ended up 0.31% at 9107.3
  • In Greece, the Athens market fell 1.33% to 636.83

On Wall Street, the Dow Jones Industrial Average is currently up 34 points or 0.19%.

Competition watchdog to look at Home Retail deal

In the UK, the Competition and Markets Authority said it was investigating the £1.4bn takeover of Argos owner Home Retail by supermarket group Sainsbury.

It said it would be looking at whether the deal would hurt competition in the UK, and it would announce its decision by 25 July.

Back with the US GDP figures, and we could be looking at a weak figure for the second quarter according to Markit:

And here’s Russian president Putin arriving in Greece:

US consumer confidence lower than expected

American consumers are more confident in May than they were in April, but the latest survey has still come in lower than analysts had been forecasting.

The University of Michigan’s final index of consumer sentiment for May was up from 89 in April to 94.7. But this was lower that the preliminary estimate of 95.8 and below the consensus of 95.4.

Meanwhile in Greece:

(See our preview earlier)

Updated

Wall Street edges higher

Investors are keeping their powder dry ahead of the remarks later from US Federal Reserve chair Janet Yellen, with the latest GDP revisions doing little to lift the mood.

The Dow Jones Industrial Average is up 28 points or 0.16% while the S&P 500 opened up 0.12% and Nasdaq just 0.09%.

And here’s how the US slowdown looks:

A US interest rate rise in the next two months is unnecessary, given the uncertainty over the country’s economy evidenced by the revised first quarter GDP figures, suggest the CEBR. It said:

We still expect the remaining three quarters of 2016 to make up for the first quarter slowdown. Despite the seasonal adjustment process, first quarter GDP data are often unreliable and overly gloomy due to seasonal factors such as winter weather. Our view is also supported by consistently strong job creation figures and a rebound in consumer confidence. Consumer sentiment saw an uptick in May due to a strong labour market showing and expectations that both inflation and interest rates would remain low.

However, the chances that interest rates will remain lower for longer are slimmer now than they were earlier this month...The minutes from the [latest Federal Open Markets Committee] meeting, and statements made by Federal Reserve officials since, indicate that some FOMC members believe that the US labour market is at full employment and that this may start putting upward pressure on inflation.

Another, less official, consideration may be the US presidential election taking place in November. In the past the Fed has been reluctant to indirectly weigh into political debates and raising interest rates too close to the election would be interpreted as a signal regarding the institution’s opinion of economic prospects. Therefore, while the FOMC’s interest rate decision in June will be data-dependant, it may also be impacted by the realisation that if interest rates do not rise in June or July, they are very likely to remain at 0.5% until at least December.

Cebr believes that raising rates in June or July is premature and unnecessary. The inflationary environment remains benign and the US economy still faces numerous risks on the global front. Lacklustre growth in export markets is already creating problems for the country’s exporters. Further strengthening the US dollar via monetary policy tightening would make US-made products relatively more expensive and therefore less desirable for foreign buyers.

David Morrison, senior market strategist at Spreadco said:

The question is how this affects the odds on a Fed rate hike this summer? As far as the markets are concerned, not very much so far although it certainly keeps the prospect alive.

However, it’s unlikely investors will want to take on additional exposure ahead of Janet Yellen’s public appearance this evening and the long holiday weekend. Whether the Fed Chair says anything related to monetary policy is another matter altogether. What should prove far more significant is next week’s raft of manufacturing PMIs along with the latest US Non-Farm Payroll release.

Dennis de Jong, managing director at UFX.com, said:

Yesterday’s durable goods orders and home sales data would have put a smile on the face of Fed Chair Janet Yellen, but today’s underwhelming first quarter GDP report is unlikely to be as well-received.

It’s not the most positive start to the financial year for the US and observers will now be keen to see if momentum can pick up in the next quarter.

There’s plenty of talk about an interest rate rise, but Yellen and Co. are likely to wait for the data to support it before pushing the button.

Despite the revision, the figures show a slowdown in GDP compared to the fourth quarter which saw a 1.4% increase.

The overall figure was lifted by spending on home building and an increase in inventory investment by businesses.

US GDP revised higher

The US economy grew more than originally thought in the first quarter, but less than some economists had been expecting.

As various members of the Federal Reserve suggested that a rate hike in June was not off the table, official figures showed an annualised 0.8% rise in GDP in the three months to March. This was higher than the first estimate of 0.5% but below estimates of a rise of 0.9%.

Updated

Greek Navy officers prepare for the arrival of the Russian President Vladimir Putin at the Athens international airport today.
Greek Navy officers preparing for the arrival of the Russian President Vladimir Putin at the Athens international airport today. Photograph: Thanassis Stavrakis/AP

The City.

This really has been dullest morning in the City for a while.

Our old friend, the FTSE 100, is refusing to show any enthusiasm and is currently down a meagre 4 points.

Investors are hoping that the US growth figures, in around 40 minutes, might cause a stir. Remember, economists expect the annualised growth rate in the last quarter to be revised up to 0.9%, from 0.4% before.

Conner Campbell of SpreadEx (who gets a bonus mark for keeping awake, frankly), says:

Friday continued at an alarmingly dull pace this morning, though there is the chance for a bit of excitement from the US open later this afternoon.

The FTSE plodded along flat on the day, with the DAX and CAC effectively following the UK index’s lead. Both regions had nothing in the way of data to offer this Friday, and with Brent Crude threatening to fall below $49 per barrel were lacking the recent commodity-buzz that has helped push the indices to 3 week highs.

Putin's Greek visit could sow discord in EU

Greece is prepares to welcome Russian president Vladimir Putin, amid tight security and fears that the visit will cause ructions within the EU.

Putin’s visit is billed as a way of deepening economic and diplomatic ties between the two countries. He’ll be discussing trade, energy and transport issues, and meeting with President Prokopis Pavlopoulos and Prime Minister Alexis Tsipras.

Putin has already signalled that Moscow wants closer links with Athens, as the Greek newspaper Kathimerini explains:

Moscow is primarily interested in buying state-run railway operator Trainose and a stake in Thessaloniki port, the country’s second largest, as Putin reiterated in a commentary for Kathimerini published on Thursday ahead of the visit.

He also said that Russia – Greece’s main gas supplier – is still very much interested in reviving the South Stream gas pipeline project.

“The issue of our energy resources being carried through southern corridors to the countries of the European Union is still on the agenda,” Putin said

But the sight of Russia’s president landing in Athens at a time when the EU is imposing sanctions is causing some concern.

Daragh McDowell, a principal analyst for Europe and Central Asia at Verisk Maplecroft, told CNBC that Putin hopes to take advantage of anger within Greece about its years of austerity.

“The extreme political and economic disruption Greece has experienced, in combination with existing cultural ties, make it a particularly attractive target for these kind of initiatives.

“Fundamentally these overtures are about sowing division and discord among the EU states in order to undermine the sanctions regime and, over the longer term, the EU as a whole.”

Resolution’s Duncan Weldon has now blogged about the IMF paper on the problems with neoliberal economics.

He explains that it’s part of a wider change of thinking at the Fund, away from the “Washington consensus” that dominated thinking before the wheels came off the global economy in 2008.

But the IMF is also pointing out the flaws in the policies implemented over the last eight years.

Duncan argues that the criticism against austerity is understandable :

Excessive fiscal tightening in countries that still have fiscal space simply hasn’t worked as promised. There are plenty of countries with ample fiscal space that haven’t used it and the world economy has suffered as a result.

And the Fund’s comments on capital controls reflect its concerns that ultra-loose monetary policy in the US and Europe has a severe impact on emerging markets. If The Fed won’t care about spillover effects, developing countries must take more precautions.

In this respect the Fund; move towards backing capital controls is a consequences of the failure of Western fiscal policy makers to do enough to support growth and the unwillingness of Western monetary policy makers to take into account the global consequences of their actions.

Jonathan Ostry, the IMF economist who co-wrote its critique of neoliberalism, is hoping to trigger a new debate about economic orthodoxy.

The Financial Times has the details:

In an interview, Jonathan Ostry, deputy director of the IMF’s research department and the article’s lead author, said the new piece was not meant as an attack on “the entire neoliberal agenda or the Washington consensus”. But he hoped it would set the stage for a broader examination of “neoliberalism” that would come out this year.

It also fitted, he argued, with work on everything from austerity and inequality to debt and the desirability of open capital accounts that he and others have been publishing since the 2008 financial crisis — and with a growing sentiment in the broader economics community.

“There are a lot of people thinking the same thing at this point, that basically some aspects of the neoliberal agenda probably need a rethink,” he said. “The crisis said: ‘The way we’ve been thinking can’t be right’.”

Financial Times: IMF economists put ‘neoliberalism’ under the spotlight

IMF criticises neoliberalism (yes, THAT IMF).

Neoliberal economics has attracted plenty of critics over the years, as the impact of privatisations, shrinking the state and austerity measures has become clear.

And now, a team at the International Monetary Fund have delivered a remarkable attack on the consequences of neoliberalism.

In a new paper they argue that the benefits of neoliberal policies has been over-blown, and its damage has been underplayed by policymakers.

They put their finger on two key issues – the impact of capital flows into emerging markets, and the austerity measures and fiscal tightening forced on governments.

They conclude that neoliberalism simply hasn’t worked as well as supporters claim, and has created inequality that actually hurt growth.

Here’s their key conclusions:

  • The benefits in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries.­
  • The costs in terms of increased inequality are prominent. Such costs epitomize the trade-off between the growth and equity effects of some aspects of the neoliberal agenda.­
  • Increased inequality in turn hurts the level and sustainability of growth. Even if growth is the sole or main purpose of the neoliberal agenda, advocates of that agenda still need to pay attention to the distributional effects.­

This won’t surprise those who have lived through the eurozone debt crisis, or previous economic perils. But it does highlight that some global policymakers are trying to learn from the mistakes of the past.

The paper suggests that capital controls, once seen as a thoroughly bad thing, might actually have helped avoid causing economic problems.

IMF paper on inequality

The IMF team even takes aim at the notion that running a budget surplus is a bright idea, asking:

Is there really a defensible case for countries like Germany, the United Kingdom, or the United States to pay down the public debt?

And they argue it’s probably not, because:

Austerity policies not only generate substantial welfare costs due to supply-side channels, they also hurt demand—and thus worsen employment and unemployment.

The piece does state that neoliberalism has had its benefits; global trade has lifted millions out of abject poverty, for example, while some privatisations have delivered better services.

But even so, “there are aspects of the neoliberal agenda that have not delivered as expected’.

Here’s the full piece: Neoliberalism: Oversold?

Activist Naomi Klein points out that the damage has already been done:

While economist Duncan Weldon of the Resolution Foundation argues that the IMF really is changing:

Updated

Mike van Dulken of Accendo Markets wonder if Yellen might play it cool at Harvard:

In focus today will likely be Fed Chair Yellen’s speech after the European close, especially after her colleagues (mostly non-voters) were out in force this week swaying expectations about a Summer rate hike.

Note, however, Yellen is only receiving an award from Harvard so may well swerve explicit mention of US monetary policy to avoid adding fuel to the fire.

Janet Yellen’s comments may not come until around 5.30pm BST, or later.

She’s due to speak at a lunch at Harvard, along with her predecessor Ben Bernanke. More details here.

Yellen could send US dollar bulls rampaging

Janet Yellen could move the markets today, when she visits Harvard to collect the Radcliffe Medal in recognition of her work.

FXTM Research Analyst Lukman Otunuga says investors will be watching the Fed chair closely, for any hints that a rate hike could be close.

Sentiment towards the US economy has improved this month with an impressive array of domestic data bolstering speculation that US rates could be increased in June or July. With retail sales, inflation and new homes sales exceeding forecasts, the prerequisites for another US rate hike in Q2 could be fulfilled if US GDP and next week’s NFP exceed expectations.

Yellen’s comments could act as a catalyst today for Dollar bulls to rampage if she chants the same hawkish tune as the other board governors. Although the CME group Fedwatch tool displays a 26% probability that a June hike could occur, concerns over slowing global growth and persistent China woes may also disrupt the Fed’s efforts to take action.

Updated

Europe’s stock markets are open, but frankly there’s little happening out there.

The main indices are all broadly unchanged, as investors wait for the US growth figures at 1.30pm BST.

Some traders may also be pondering the long weekend (there’s a bank holiday on Monday), or wondering how England will fare against Sri Lanka in the Test Match (probably rather well).

Mining shares are leading the risers in London, where the FTSE has managed to rise by 3 whole points.

Tony Cross of TrustNet Direct explains:

Commodity stocks are still finding favour, helped in no small part by US dollar weakness amidst the idea that the Fed may not be in a position to hike rates next month as had been earlier thought.

European stock markets today

Updated

A glimmer of good news from across the Channel.

French consumer confidence has hit its highest level since October 2007, when the world economy was reeling from the credit crunch.

The country’s main consumer confidence gauge has jumped to 98 in May, which beats economists’ expectations of 95. That’s tantalising close to the long-term consumer confidence average of 100.

I do wonder, though, whether the clashes on the streets this week will hurt confidence.

Tens of thousands of people have been protesting against legislation to make it easier to both hire and fire workers, prompting clashes with riot police yesterday.

My colleague Angelique Chrisafis explains:

Striking French workers continued to disrupt oil refineries and nuclear power stations, halted some air traffic and trains and prevented almost all national newspapers from printing in the growing industrial action. Union activists blocked roads and bridges in northern France while some train drivers and air traffic controllers joined the action.

World leaders at the G7 meeting in Tokyo have declared that global growth is their “urgent priority”, but not actually announced any new measures to deal with it.

The official declaration following the meeting declares:

Global growth remains moderate and below potential, while risks of weak growth persist.....

They then warn that growth is “moderate and uneven”, while global trade is disappointing.

David Cameron, the UK PM, has also managed to get a reference to next month’s EU referendum into the communique. Leaders have agreed that Brexit would harm international trade, and is a “further serious risk” to growth.

Updated

Japanese PM hints at delay to sales tax

Japan’s stock market has gained ground today, following reports that prime minister Shinzo Abe is considering postponing one of his flagship policies.

Abe dropped a broad hint earlier today that the planned hike in sales tax could be delayed.

This tax was a crucial part of Abe’s attempts to improve Japan’s financial situation, but with the economy weak and inflation low, a rethink could be on the cards.

Abe told a press conference at the G7 meeting that:

“We must reignite powerfully the engine of Abenomics. That undoubtedly would include a decision on what to do with the sales tax hike.”

A postponement probably would help consumer confidence and economic growth. However, it would undermine Abe’s commitment to improving Japan’s troubling fiscal position (a national debt of more than 200% of GDP).

Updated

The agenda: US GDP and Yellen speech awaited

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

It’s Friday, and it’s a bit quiet. But there are still a few events coming up that might get the blood pumping.

Investors are mainly waiting for the second estimate of America’s growth in the first three months of the year, at 1.30pm BST.

The first estimate was pretty dire, showing that growth slowed to an annual rate of just 0.4%. But with more data now available, economists believe we could get an upgrade to perhaps 0.9%. That’s still only a quarterly rate of around 0.2%, but it would calm fears that the US economy was faltering.

All US data is currently seen through the lens of monetary policy, and whether it’s strong enough to prompt an interest rate rise soon.

America’s top central banker, Janet Yellen, might have something to say about that when she visits Harvard (where she taught in the early 1970s).

RBS Capital Markets explains:

Yellen speaks at Harvard’s Radcliffe Day, where she will engage in “a conversation about her groundbreaking achievements.” The widespread expectation is, of course, that she will reiterate the more hawkish line taken by almost all recent Fed speakers.

That event begins at 3.30pm BST, or 10.30am local time.

Otherwise, the economics calendar is as bare as Old Mother Hubbard’s cupboard before payday.

But we’ll also keep one eye on Japan, where the G7 leaders meeting is wrapping up. Our G7 liveblog is here:

The other eye will be on Greece, where Russian president Vladimir Putin is paying a visit to Athens (having been blackballed from the G7) . This trip will is likely to reignite concerns in Brussels that Moscow could be using austerity-gripped Greece as a lever to divide Europe.

Officially, the visit will deliver a “number of bilateral agreements” and will focus on trade, investment and joint energy and transport projects.

We’ll be tracking all the main events through the day (and hoping the newsflow picks up a bit)

Updated

Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Spider-Noir showrunner says the goal is "to make a version of Spider-Man that no one had seen before," clarifying it's the "same character, different universe" from the Spider-Verse variant
Spider-Noir showrunner says "It's not a continuation of Into the Spider-Verse"
Total Film
Total Film
Tracee Ellis Ross Gives the Ponytail a High-Fashion Upgrade
Three ponys are better than one.
Marie Claire
Marie Claire
Rachel Zegler reflects on ‘confusing time’ during Snow White backlash
There was a backlash on social media after Zegler, who is from a Colombian background, was cast as the character, who is described as ‘white as snow’.
Evening Standard
Evening Standard
More Evidence Tom Brady And Alix Earle Are Still Hanging Out Amid Romance Rumors
This can't be a coincidence, right?
Cinemablend
Cinemablend
5 Racy Photos of Dakota Johnson as Actress Strips Down in Calvin Klein Ad
Take a look back on some of Dakota Johnson's most stunning photos from TV appearances and magazine covers.
International Business Times UK
International Business Times UK
Restaurant owner makes an influencer cry for asking to change her order. Years later, they slid into her dm begging for a collab: ‘No thank ew’
We’ve all heard the phrase “be careful who you’re mean to on the way up.” But one restaurant owner is currently learning that lesson in real-time.
The Mary Sue
The Mary Sue
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.
Download on the AppStore Get it on Google Play