Washington, July 27

Bullishness is not a word much associated with Janet Yellen since she became Federal Reserve chair 18 months ago, but that could change with the Fed’s next policy meeting.

With a global focus on when the US central bank will begin raising interest rates after nearly seven years locked at zero per cent, analysts will be looking for a shift in how the Yellen-led Federal Open Market Committee (FOMC) on Wednesday describes the US economy.

No decision to raise rates is expected in FOMC meet Tuesday and Wednesday. But language of policy statement could point to a date, which could be as early as September.

Long seen as the key voice of caution over tightening monetary policy, the 68-year-old economist in recent weeks has sounded more confident in the US economy, even as she stated publicly the risks that could challenge growth.

In two separate statements this month, Yellen triggered surprise by sticking firmly to the view that the FOMC will decide on a rate rise before the end of the year.

To many analysts, spotty US economic performance data — strong hiring but weaknesses in building, consumer spending and manufacturing — combined with generally sluggish global economic activity justified holding off on the first rate increase in nine years.

Some say the Fed should wait until early 2016 to be sure the roots of US growth reach deep.

And indeed, in a speech on July 10 and then a policy statement to Congress on July 15, Yellen acknowledged that the weaknesses that have nagged at the FOMC for more than two years are still there.

Even as jobless rate has fallen to 5.3 per cent in July, labour force participation rate is still extremely low at 62.6 per cent; the level of part-time employment is high at 6.5 million people, two million more than before the crisis; and wage growth has remained slow.

Amid market volatility over the question, Yellen has repeatedly stressed that the first rate hike is less important than how the Fed implements subsequent increases.