The US economy is said to be in danger of overheating and so it would be desirable for a slight increase in interest rates. Current US Treasury Secretary and former US central bank chief Janet Yellen think so.
“It is possible that interest rates will have to rise somewhat to ensure that our economy does not overheat, even though the additional expenditure is quite small relative to the size of the economy,” Yellen said, according to Reuters.
Treasury Secretary Joe Biden’s statement was soon appreciated by investors who helped the US dollar hit a two-week high and strengthened 0.3 percent against other major world currencies. Conversely, stock markets, led by the technology segment, headed down. The Nasdaq index lost nearly two percent.
Although the market is expecting the dollar to grow stronger for the rest of the year due to moderately rising interest rates on US government bonds, Janet Yellen’s statement was a little after all surprising. Particularly in the context of signals repeatedly sent in recent weeks by Federal Reserve chief Jerome Powell. Indeed, the Fed continues to hear that it is ready to assist the US economy with a relaxed monetary policy (including virtually zero interest rates) until the Coronavirus pandemic fails to come under definitive control.