US confidence slump will not stop rates hike

 
Caitlin Morrison
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Yellen is expected to raise rates this year
BUSINESS confidence in the US remains slumped, weighed down by a strong dollar and concern over the global economy.

Bearish survey data, released by Markit this morning, adds to a string of weak economic data emerging from the US of late.

Despite the negative outlook, however, Federal Reserve boss Janet Yellen insisted at the end of last week that her organisation will hike interest rates before the end of the year.

In a speech on Friday Yellen said she expects the economy to grow steadily for the remainder of the year, allowing the Fed to move ahead with its first rate hike in nearly a decade.

“I expect it will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalising monetary policy,” she stated.

However, Yellen added that the Fed will be “watching carefully” to see if there is continued improvement in labour market conditions, and said it will need to be “reasonably confident” that inflation will move back to two per cent in the next few years.

Meanwhile, Markit’s Business Outlook Survey in June, which looks at expectations for the year ahead across 650 US private sector companies, indicated that business sentiment was unchanged from the post-crisis low recorded in February.

At 24 per cent in June, the net balance of firms expecting an upturn in business activity over the next 12 months was the joint-lowest since the survey began in late-2009.