It has been a while since Federal Reserve Chair Janet Yellen has spoken publicly about monetary policy. Her latest speech continues to point more toward a Federal Open Market Committee (FOMC) rate hike, rather than not hiking. The real question is when, and this speech may keep a September rate hike potentiality alive. Still, there is no timetable laid out, and the debate over the time of a hike will continue.

Yellen’s speech was titled “The Federal Reserve’s Monetary Policy Toolkit: Past, Present, and Future,” and that should provide the academic framework that looks backward and forward.

One interesting issue is that Yellen said in the longer run that fed funds might settle around 3%. The world today does not seem to accommodate that, but Fed-speak revolves around much more historical data rather than real life.

Academics and investors often key off of different data points. Here is the crux of the chances of a rate hike going up:

Looking ahead, the FOMC expects moderate growth in real gross domestic product (GDP), additional strengthening in the labor market, and inflation rising to 2 percent over the next few years. Based on this economic outlook, the FOMC continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near our statutory objectives. Indeed, in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months. Of course, our decisions always depend on the degree to which incoming data continues to confirm the Committee’s outlook.

Yellen’s full speech notes are available for those who wish to read academic work. Stay tuned.

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