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London pre-open: Stocks seen lower as investors eye Fed speakers

The Federal Reserve is setting the stage for a US interest-rate increase later this month, with the central bank's leading voice on worldwide economics saying the global economy seems to have turned a corner, clearing the way for a hike "soon".

Several of Yellen's USA central bank colleagues in recentdays had also put a rise at the next rate-setting meeting onMarch 14-15 of the committee firmly in view.

Banks climbed Friday as investors priced in an increasing likelihood that interest rates will rise in the coming months.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, summed up Yellen's speech in one line: "They'll hike this month unless payrolls are disastrous".

"I think most of my colleagues have decided that we should just be patient and wait to see what happens", Yellen said.

On Tuesday, two influential Fed policymakers, William Dudley and John Williams, encouraged dollar bulls with comments that suggested rate-setters are anxious about waiting too long in the face of pending economic stimulus from Washington.

Other analysts are still waiting on Yellen and Fischer.

"In our view, this show of confidence in both domestic and external conditions suggests the committee is increasingly comfortable continuing to tighten policy further", they said.




"We now judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect", Yellen said.

"The Federal Open Market Committee has made significant tactical adjustments along the way", she said.

She cautioned that monetary policy "cannot be and is not on a preset course", although it is likely to happen faster this year than last.

"After being an important constraint in the past few years, the external environment now appears more benign than it has been for some time", Brainard said, directly addressing the set of risks that led her to become one of the stronger advocates for delaying any rate increase until the global environment improved.

However, Yellen said, "I now see no evidence that the Federal Reserve has fallen behind the curve".

USA consumer spending cooled in January as demand for automobiles and utilities fell, but inflation recorded its biggest monthly increase in four years, raising the probability of an interest rate hike from the Fed this month.

At the same time, Yellen said the Fed was not behind the curve and could still raise rates at a gradual pace. "The market's pricing it pretty accurately", he said, noting expectations were at 28 per cent at the start of the year.

Yellen did not directly address the likely impact of theTrump administration's economic policies in her remarks. Yellen said Fed officials are inclined to wait to see which measures are approved by Congress.

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