Yellen Says Interest Rate Hike Depends on Labor Market

At the annual economic symposium in Jackson Hole, Wyo. Janet Yellen, the chairwoman of the U.S. Federal Reserve said that a further increase in short-term interest rates would depend on the labor market.

Yellen said that though the economy has been improving, the great recession has made assessing the job scenario especially difficult. She added that there was "no simple recipe" for the policymakers to gauge the labor market and determine when it would be appropriate to raise interest rates, The Los Angeles Times reports.

"In the five years since the end of the Great Recession, the economy has made considerable progress in recovering from the largest and most sustained loss of employment in the United States since the Great Depression," Yellen said at the conference.

Earlier this month, The U.S. Bureau of Labor Statistics revealed that the country had added more than 200,000 jobs for six consecutive months for the first time since 1997. Yellen said that though this report was encouraging, the Fed was still waiting for stronger evidence of economic growth.

"Our assessments of the degree of slack must be based on a wide range of variables and will require difficult judgments about the cyclical and structural influences in the labor market," Yellen asserted.

 Many analysts believe that the first round of interest rate hikes should come by the middle of 2015. But many others believe that Yellen's decisions could change.

At the conference, Yellen also added that the Feds will continue to cut back on their bond- buying scheme, which they had introduced to support the economy. She also added that only strong evidence and changes in economic factors would push the Fed to make any major decision.

Experts say this was an expected move from the Feds.

"Today's speech from Janet Yellen is more or less what should have been expected. She maintains the view that more work lay ahead but presents a set of 'on the other hand' explanations for number of indicators and observations. For example, the word 'however' appears eight times in the speech and any number of 'converselys' make an appearance. At seemingly every turn, when articulating the view that a given indicator suggests labor market weakness or slack, she balances the observation with an alternative argument," Dan Greenhaus, chief strategist at BTIG, a brokerage, wrote to clients in a note.