By Kitco News

Monday June 06, 2016 12:34

(Kitco News) - Federal Reserve Chair Janet Yellen has slightly dismissed the disappointing May employment report as she still expects it appropriate to gradually raise interest rates “over time.”

However, there appears to be a slight shift in expectations as Yellen, in her speech at an event in Philadelphia didn't provide a timeline for interest rates. In her previous comments made at an event at Harvard University, she said that it could be appropriate to raise interest rates in coming months.

On the labor market, Yellen described Friday’s employment report as “concerning” she added, “one should never attach too much significance to any single monthly report.”

Overall she said that the labor market situation has been quite positive.

Yellen appears to be generally positive on the U.S. economy.

“The positive economic forces have outweighed the negative, and despite the challenges that the economy continues to face, I continue to expect further progress toward our employment and inflation objectives,” she said.” My position has been, and remains, cautiously optimistic.”

Yellen also took time to reiterate that the U.S. central bank remains data dependent.

“What is certain is that monetary policy is not on a preset course, and that the Committee will respond to new data and reassess risks so as to best achieve our goals,” she said in her concluding remarks.

Gold futures are taking Janet Yellen’s comments in stride as there as the market has held on to Monday’s modest gains, trading at $1,244 an ounce, 15 minutes after the release of her speech.

Yellen’s comments have also not significantly impacted interest rate expectations after Friday’s paradigm shift. CME 30-Day Fed Fund Futures are pricing in a 5.6% chance of a hike in June; before Yellen’s comments expectations were hovering at 3.8%. July expectations are also slightly higher at 35.1%, up from its previous reading at 34.6%. September’s expectations hover around 41.9%, up from 41.7% before her comments.

Royce Mendes, senior economist at CIBC World Markets, said that generally it appears Friday’s employment report hasn’t completely derailed interest rate increases later in the year; however, he added that it is clear the central bank is going to take a gradual approach.

“We continue to expect a September move from the Fed,” he said.

Paul Ashworth, chief U.S. economist at Capital Economics, said that Yellen’s comments don’t shift his firm’s position that the U.S. central bank will raise interest rate two times in 2016. He added that despite the lack of a timeline, the possibility of a rate hike as early as July are still possible.

“Based on her speech today, Fed Chair Janet Yellen might still be in favor of a July rate hike, but it will require a bounce-back in June's employment figures and a vote by the UK to remain in the European Union,” he said.

Source:Kitco