• Summarize of Yellen’s speech
- Fed's Yellen: Fed not behind the curve, gradual hikes 'prudent'.
- Risky, unwise to run economy markedly, persistently hot. Jobless rate close to estimates of long-run level.
- Capital spending to likely strengthen modestly in 2017. Fed has made considerable progress toward its two goals.
- Growth unlikely to pick up markedly in near term. Expects some further strengthening in labor market.
- Cites restraint of weak foreign demand on U.S. economy, Fed is 'closing in' on its 2% inflation target.
- Signs of overheating in broader economy are scarce, unlikely labor market could rapidly overheat.
- Sees inflation rising to 2% over next couple of years, unclear what potential fiscal policy means for outlook.
With monetary policy still modestly accommodative, the U.S. central bank should continue to raise interest rates slowly to keep jobs plentiful and inflation low, Federal Reserve Chair Janet Yellen said on Thursday.
"I think that allowing the economy to run markedly and persistently “hot” would be risky and unwise," Yellen said in remarks prepared for delivery to the Stanford Institute for Economic Policy Research.
• San Francisco Federal Reserve Bank President John Williams on Thursday, the eve of the inauguration of a new U.S. president who has promised big changes, said he sees no more economic uncertainty now than he has throughout most of his career.
• The index for current manufacturing activity in the region increased from a revised reading of 19.7 in December to 23.6 this month.* Forty percent of the firms reported increases in activity this month; 17 percent reported decreases. The general activity index has remained positive for six consecutive months, and the activity index reading was the highest since November 2014.
• In a separate report, the Labor Department said initial claims for state unemployment benefits fell 15,000 to a seasonally adjusted 234,000 for the week ended Jan. 14. That was just shy of the 233,000 level touched in mid-November, which was the lowest since November 1973.
• Housing starts jumped 11.3 percent to a seasonally adjusted annual rate of 1.23 million units last month, the Commerce Department said. Starts were driven by a 57.3 percent surge in the construction of multi-family housing units, which offset a 4.0 percent drop in single-family starts.
• Permits for future home construction slipped 0.2 percent to a 1.21 million-rate last month as approvals for the multi-family segment fell 9.0 percent. However, permits for single-family homes construction rose 4.7 percent.
• U.S. homebuilding rebounded sharply in December as a firming economy boosts demand for rental housing, while an unexpected drop in the number of Americans filing for unemployment benefits last week pointed to a further tightening in the labor market.
• The dollar rose against a basket of currencies on the data and comments by European Central Bank chief Mario Draghi, suggesting the euro zone still needed support from monetary policy. Prices for U.S. government debt fell. U.S. stocks were little changed.
The dollar and U.S. Treasury yields gained on Thursday after a batch of solid economic data, while Wall Street indexes slipped as investors held back a day ahead of the inauguration of President-elect Donald Trump.
The dollar climbed 0.2 percent to 115.02 yen. On Thursday, it surged as much as 0.8 percent before closing less than 0.2 percent higher at 114.82 yen.
The dollar index, which tracks the greenback against a basket of six major global peers, was little changed at 101.18 on Friday after paring a 0.8 percent gain to close up 0.2 percent.
• The euro erased losses made after European Central Bank chief Mario Draghi played down a recent rise in euro zone inflation, as investors parsed his statement and noted he had announced no changes to policy.
The common currency was steady on Friday at $1.06595. It dropped as much as 0.4 percent on Thursday, before retracing its steps to close 0.3 percent higher.
• Boosted by higher government spending and record bank lending, China is expected to report on Friday that its economy grew by a steady 6.7 percent in the fourth quarter, giving it a solid tailwind heading into what is expected to be a turbulent 2017.
• Oil prices edged higher on Thursday, but swelling U.S. crude stockpiles limited the rebound from a one-week low after the International Energy Agency said oil markets had been tightening even before cuts agreed by OPEC and other producers took effect.
U.S. West Texas Intermediate crude oil settled up 29 cents at $51.37 per barrel, having dropped to a one-week low on Wednesday at $50.91 a barrel.
International benchmark Brent crude was up 34 cents at $54.26 a barrel by 2:33 p.m. ET (1933 GMT), after closing down 2.8 percent in the previous session.
Reference: Reuters, Phil.frb, CNBC, Daily FX
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