US interest rates could increase soon after the Federal Reserve hinted it is considering a change to monetary policy in the coming months.
Chair of the Fed Janet Yellen stated that interest rates could start to go up in the US as early as next year. Ms Yellen, who was the preferred candidate of president Barack Obama, took over the role from Ben Bernanke towards the end of 2013.
At a press conference, Ms Yellen said: "This is the kind of term it's hard to define. Probably means something on the order of six months, or that type of thing."
Ms Yellen made her comments to reporters shortly after it was announced that the Fed said it is going to scale back bond purchases by a further $10 billion (£6 billion) per month. This means it is now three times in a row that the central bank has tightened its stimulus efforts.
Date of rate change
Bond purchases are now expected to end later this year, which would imply rate increases will start to take place at around April 2015.
Overnight interest rates in the US were lowered by the Fed to zero per cent in December 2008, a move which was a response to the global financial crash, which damaged the US economy.
Mr Obama has overseen a recovery in the country's financial situation in the last few years, but Ms Yellen will now be looking to increase the pace of growth, while making sure it remains at a responsible and sustainable level.
In a statement released to announce its latest policy decision earlier in the month, the Fed said: "This assessment will take into account a wide range of information, including measures of labour market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments."
While the US looks set to increase interest rates sooner rather than later, the base rate in the UK remains at a record low of 0.5 per cent, as it has for the last five years. However, the Bank of England's Monetary Policy Committee is reported to be mulling over a rate rise in the near future.
Find up to date information on the FTSE 100 and spread betting strategies at City Index
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.