It is possible that the Federal Reserve may be done raising short-term interest rates, though another couple of rate hikes may still be in the cards, former Fed Chair Janet Yellen said Jan. 14.
If the Fed does opt for further tightening, it will likely hold off for some time as the central bank examines whether the economic outlook has shifted, the former Fed chief added.
"If there is a downturn in the global economy and it spills over into the United States, we could've seen the last interest rate increase in this cycle. That's a possibility, too," Yellen said at the National Retail Federation's Big Show trade event in New York. "I think at this point, the Fed will take a breather, evaluate where the economy is."
Yellen's comments add to the growing speculation that the central bank may have wrapped up its tightening cycle.
The Fed raised its benchmark federal funds rate four times in 2018 and has penciled in two more rate hikes for 2019. But futures markets suggest that some investors believe the Fed will keep its benchmark rate flat, while a few are betting that the Fed will actually cut rates.
Fed officials have adopted a more dovish tone in recent days, highlighting increased uncertainties such as ongoing trade tensions, an expected dip in global growth and tighter financial conditions. They also have emphasized that they have the ability to be patient in making any rate changes, which analysts say likely sets up a pause for any near-term hikes.
Yellen said the U.S. economy should continue to grow into July, making the current U.S. economic expansion the longest on record.
Slow gains in productivity and wage growth are limiting the U.S. inflation rate, Yellen said. But speaking to an audience of retailers and consumer industry experts, Yellen also said that competition between major retailers, such as Amazon.com Inc. and Walmart Inc., could also be holding back inflation.
As retailers have grown their online presence, many have invested in technology, including delivery options, Kara Swisher, a co-founder and editor-at-large of technology-focused news website Recode, said during the panel with Yellen. At the same time, those companies have had to keep their prices low to attract consumers who suddenly have many options for buying goods online, Swisher added.
Asked whether those dynamics could be weighing on the broader U.S. inflation rate, Yellen said: "It may well be that the Amazons of the world are changing their prices in a way that makes our economy less inflation-prone."