Interest rates to be raised several times up to 2019, Yellen says

CALIFORNIA, U.S. - U.S. Federal Reserve Chairman Janet Yellen on Wednesday indicated the central bank will raise its benchmark interest rate gradually several times a year until it pushed the Fed's benchmark rate close to three percent by the end of 2019.

She, however, did not specify when the next interest rate will take place or how high it will be. 

Currently, the rate is between 0.5 percent and 0.75 percent.

“Now, many of you would love to know exactly when the next rate increase is coming and how high rates will rise. The simple truth is, I can't tell you because it will depend on how the economy actually evolves over coming months,” she said in her speech. 

“That said, as of last month, I and most of my colleagues - the other members of the Fed Board in Washington and the presidents of the 12 regional Federal Reserve Banks - were expecting to increase our federal funds rate target a few times a year until, by the end of 2019, it is close to our estimate of its longer-run neutral rate of 3 percent.”

“Right now our foot is still pressing on the gas pedal, though, as I noted, we have eased back a bit,” Yellen also said in her remarks. 

“Our foot remains on the pedal in part because we want to make sure the economic expansion remains strong enough to withstand an expected shock, given that we don't have much room to cut interest rates.”

In her speech at the Commonwealth Club in San Francisco, she said the U.S. economy was meeting the central bank's inflation and employment goals, and was confident it would push on.

Following Yellen's remarks, gold prices remained under pressure on Thursday. 

Spot gold was down 0.1 percent to $1,202 per ounce earlier, while U.S. gold futures fell over percent to $1,197.10.

"(Yellen's) speech was interpreted as being bearish for gold," said INTL FCStone analyst Edward Meir.

"We would view any short-term weakness as a buying opportunity in gold given that we do not think the Fed will be pushing the higher rate trajectory story so aggressively over the short-term," Meir added.

Mark To, head of research at Hong Kong's Wing Fung Financial Group, said, "We can still say there is an inverse relation between dollar and gold as we are waiting to hear from Trump on his policies. We can expect random shocks from him." 

"There should be some consolidation around the $1,200 levels for sometime."

The dollar, meanwhile, held steady on Thursday. 

The greenback was little changed at 114.670 yen. 

It gained nearly two percent the previous day, when it pulled ahead from a seven-week low of 112.570 and snapped a seven-day losing streak.

"Yellen's comments were not particularly new, but it helped participants buy back the dollar which had sunk low along with Treasury yields," said Shin Kadota, senior forex strategist at Barclays.

Greg McKenna, chief market strategist at FX and CFD provider AxiTrader, said, "Yellen’s comments reinforced the message that we have been getting from other Fed speakers that the economy is already strong even before the addition of any stimulus from Trumponomics." 

Asian markets, meanwhile, advanced. 

Tokyo's Nikkei finished 0.9 percent higher as exporters were lifted by the weakening yen. 

Sydney moved up 0.2 percent and Seoul put on 0.1 percent. 

Singapore, Jakarta, Manila and Mumbai also posted gains.

However, Hong Kong lost 0.2 percent in the afternoon and Shanghai closed 0.4 percent lower.

On Wednesday, the S&P 500 gained 0.18 percent, the Dow Jones Industrial Average fell 0.11 percent and the Nasdaq gained 0.31 percent.