Wednesday, November 22, 2017

Yellen stepping down, December rate hike possible

Federal Reserve chairwoman Janet Yellen will step down from the board early next year. Photo by Chip Somodevilla/Getty Images
With the end of her tenure as Fed chief coming in February 2018, Janet Yellen has announced she will leave the Federal Reserve board altogether. Her departure marks the end of an era in which unemployment has dropped to a near record low 4.1 percent and millions of jobs have been added in the post-Recession recovery years. She will be replaced by President Trump's new nominee Jerome Powell as chairman of the Fed board.

Meanwhile, Fed leaders indicated this week that another increase to the key central bank interest rate could be coming again in December this year. Board members will likely factor in the November job report, wage gains or losses, consumer spending and other variables before making a decision at their mid-December meeting to raise the benchmark interest rate.

A rate hike would not be a surprise for market investors, as multiple increases were expected throughout 2017. A potential rate hike has already been "priced in" to the markets, so no drastic changes to mortgage rates are anticipated - although nothing is ever certain. Despite 17 million jobs being added to the U.S. economy since 2009, inflation rates remain stubbornly below target, so that is one factor that could impact December rate changes.

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