Despite recent sizable job gains, Federal Reserve Chair Janet Yellen is signaling that her agency is in no rush to withdraw the massive support it is providing the U.S. economy.
Extra caution is warranted, she said Tuesday, given a number of false dawns in this recovery when a hoped-for acceleration in growth has failed to materialize.
Although the economy continues to improve, the recovery is not yet complete, she told the Senate Banking Committee, delivering the Fed’s semiannual economic report to Congress.
Analysts said Yellen’s remarks indicated that the central bank plans to keep its benchmark short-term interest rate near a record low of zero, where it has been since December 2008, for some time to come.
Yellen acknowledged the improvement in the labor market, where the unemployment rate fell to 6.1 percent in June.
But she said this rate was still above the 5.2 percent to 5.5 percent that Fed officials view as optimal.
On inflation, Yellen noted that prices by the Fed’s favored price gauge were up 1.8 percent in the 12 months ending in May, and she noted that this was still below the Fed’s 2 percent target.
Retail sales tick up 0.2 percent in June
U.S. retail sales increased slightly in June, evidence that consumers remain cautious despite steady job gains this year.
Retail sales rose just 0.2 percent last month, the Commerce Department said Tuesday, held back by a sharp drop at building and garden supply stores.
Sales also fell at restaurants and at auto dealers.
The figures suggest that Americans are still reluctant to spend freely, limiting growth in the April-June quarter.
While employers have stepped up hiring since January, wage growth remains weak and is barely keeping up with inflation. Retail sales are closely watched because consumer spending accounts for 70 percent of the economy.
Businesses steadily restocking shelves
U.S. companies restocked their store shelves and warehouses at a steady pace in May, a sign they expect sales will remain solid in the months ahead.
Business stockpiles rose 0.5 percent in May, the Commerce Department said Tuesday. That was down slightly from a 0.6 percent gain in the previous month. April’s increase was the highest in six months. Total business sales rose 0.4 percent, much lower than April’s 0.8 percent gain.
Steady inventory rebuilding can bolster economic growth by increasing demand for manufactured goods and boosting factory production.
Sale of new drugs lifts J&J profit 13%
Strong sales of several new drugs, particularly its hot new hepatitis medicine, lifted Johnson & Johnson’s second-quarter profit by 13 percent, topping analysts’ expectations.
The world’s biggest maker of health care products raised its 2014 profit forecast for the second time since January, again up by a nickel to a new range of $5.85 to $5.92 a share, excluding one-time items.
J&J on Tuesday reported earnings increased to $4.33 billion, or $1.51 a share, from $3.83 billion, or $1.33 a share, a year earlier.