Janet Yellen acknowledged yesterday that the US’s persistently subdued inflation could raise questions about the Federal Reserve’s current path of gradually lifting interest rates and vowed to watch prices “very closely” for signs they were stagnating.
The Fed chair insisted it was “premature” to second guess her policymakers’ determination that inflation was slowly heading towards the central bank’s target of 2 per cent. But her note of caution helped sparked a rally in US Treasuries and equities, with investors hopeful Ms Yellen would maintain the Fed’s easy money stance for longer.
The Dow Jones Industrial Average hit a new intraday high of 21,580.79 and yield on the benchmark 10-year Treasury slid more than 4 basis points to 2.316 per cent.