SAN FRANCISCO: The Federal Reserve is considering raising near-zero interest rates this year even though this may slow the US recovery, Fed Chair Janet Yellen said.
The Federal Open Market Committee is now “giving serious consideration to beginning to reduce later this year some of the extraordinary monetary policy accommodation currently in place,” Yellen said in a speech in San Francisco, according to the prepared text.
Yellen emphasized that the FOMC was taking a “gradualist approach” as it weighs whether the economy is strong enough to weather higher rates.
Earlier this month, the Fed’s policy arm opened the door to a federal funds rate hike as early as midyear, dropping the word “patient” in its post-meeting statement.
But a string of weak economic data, particularly in consumer spending, housing and manufacturing, has muddied the outlook for an increase in rates pegged at the zero level for more than six years.
The central bank took note of the sluggishness in mid-March, saying that growth prospects were more muted than they were just three months ago.
The US central bank slashed 0.3 percentage point from its growth forecast for this year, to 2.3-2.7 percent, in part because American households had tailed back spending.
Still, the recovery from the Great Recession that ended in 2009 appeared on track enough to sustain a rate hike.
“With continued improvement in economic conditions, an increase in the target range for that rate may well be warranted later this year,” Yellen said at a conference sponsored by the Federal Reserve Bank of San Francisco.
The Fed’s ultra-low rate has supported a sizable reduction in labor market slack over the past two years, she said, and appears to be leading to “further substantial gains.”
“A modest increase in the federal funds rate would be highly unlikely to halt this progress, although such an increase might slow its pace somewhat,” the Fed chief acknowledged.
“We view Yellen’s remarks as attempting to shift the debate from ‘when’ to ‘how fast’ and communicating a gradual tightening cycle,” Barclays analyst Michael Gapen said.
Her remarks came after the Commerce Department earlier in the day left unchanged its estimate of fourth-quarter gross domestic product growth at an annual rate of 2.2 percent.
The GDP number disappointed analysts, who expected a revision upward to a 2.4 percent pace that would show the economy had greater momentum going into 2015.
“The first quarter looks even softer, in part due to adverse weather, but abstracting from the vagaries of the quarterly data, real growth appears to be trending close to a respectable three percent pace,” said Scott Hoyt of Moody’s Analytics.
Federal Reserve weighs rate hike ‘this year’: Janet Yellen
Federal Reserve weighs rate hike ‘this year’: Janet Yellen
Saudi ports brace for cargo surge as shipping lines reroute
RIYADH: Preliminary estimates suggest that several global shipping lines could reroute part of their operations to Saudi Arabia’s Red Sea ports, potentially adding 250,000 containers and 70,000 vehicles per month, according to Rayan Qutub, head of the Logistics Council at the Jeddah Chamber of Commerce, in an interview with Al-Eqtisadiah.
“Any disruption in the Strait of Hormuz not only affects maritime traffic in the Arabian Gulf but could also reshape global trade routes,” Qutub said, highlighting the strait’s status as one of the world’s most critical maritime chokepoints for energy and goods transport.
With rising regional tensions, international shipping companies are reassessing their routes, adjusting shipping lines, or exploring alternative sea lanes. This signals that the current challenges extend beyond the Arabian Gulf, impacting the global supply chain as a whole.
Limited impact on US, European shipments
The effects of these developments will not be uniform across trade routes. Qutub noted that goods from China and India, which rely heavily on routes through the Arabian Gulf, are most vulnerable to disruption. In contrast, shipments from Europe and the US typically traverse western maritime routes via the Suez Canal and the Red Sea, making them less susceptible to regional disturbances.
Saudi Arabia’s strategic location, he emphasized, strengthens the resilience of regional trade. The Kingdom operates an integrated network of Red Sea ports — including Jeddah, Rabigh, Yanbu, and Neom — that have benefited from substantial infrastructure upgrades and technological enhancements in recent years, boosting their capacity to absorb increased cargo volumes.
Red Sea bookings
Several major carriers, including MSC, CMA CGM, and Maersk, have already opened bookings to Saudi Red Sea ports, signaling a shift in operational focus to these strategically positioned hubs.
However, Qutub warned that rerouted shipments could increase sailing times. Cargo from Asia, which normally takes 30-45 days, might now require longer voyages via the Cape of Good Hope and the Mediterranean, potentially extending transit to 60-75 days in some cases.
These changes are also reflected in rising shipping costs, driven by longer routes, higher fuel consumption, and increased insurance premiums — a typical response when global trade patterns shift due to geopolitical pressures.
Qutub emphasized that Saudi Arabia’s transport and logistics sector is managing these developments through coordinated government oversight. The Ministry of Transport and Logistics, the Logistics National Committee, and the Logistics Partnership Council recently convened to evaluate the impact on trade and supply chains. Regular weekly meetings have been established to monitor developments and implement solutions to safeguard the stability of supplies and continuity of trade.
He noted that the Kingdom’s logistical readiness is the result of long-term strategic investments, encompassing ports, airports, road networks, rail systems, and logistics zones. Today, Saudi logistics integrates maritime, land, rail, and air transport, enabling a resilient response to global disruptions.
Qutub also highlighted the need for the private sector to continuously review logistics and crisis management strategies, develop alternative plans, and manage strategic stockpiles. Such measures are essential to mitigate temporary fluctuations in global trade and ensure smooth supply chain operations.
