As Federal Reserve Chairwoman Janet Yellen hinted at a rate hike and removal of accommodative measures, U.S. equities and stock exchange traded funds continued to slip Friday.
The S&P 500 Index, along with related funds including the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard 500 Index (NYSEArca: VOO), were 0.1% lower Friday.
Yellen said an interest-rate hike would be “likely appropriate” at the Fed’s upcoming meeting if employment and inflation meet the policy makers’ expectations, reports Jeanna Smialek for Bloomberg.
“At our meeting later this month, the Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate,” Yellen said in prepared remarks at the Executives’ Club of Chicago.
The Fed will reveal whether or not it is raising interest rates on March 15 following a two-day meeting. Prior to the meeting, an employment report will be announced March 10, with economists expecting a 190,000 payroll gain in February. Additionally, the central bank will receive a Consumer Price Index inflation reading the day of its meeting.
“On the whole, the prospects for further moderate economic growth look encouraging, particularly as risks emanating from abroad appear to have receded somewhat,” Yellen said.
Given the more hawkish stance from top Fed officials, such as New York Fed President William Dudley and Governor Lael Brainard, options traders are now pricing in a 92% chance of a rate hike this month, compared to a 40% chance predicted a week ago.
“I currently see no evidence that the Federal Reserve has fallen behind the curve, and I therefore continue to have confidence in our judgment that a gradual removal of accommodation is likely to be appropriate,” Yellen said. However, “unless unanticipated developments adversely affect the economic outlook, the process of scaling back accommodation likely will not be as slow as it was during the past couple of years.”
For more information on the markets and U.S. Stock ETFs, visit our S&P 500 category.