Over the last six weeks, gasoline prices have increased by 7% to reach a national average of $3.54 per gallon. But gas prices are likely to retreat, according to AAA spokesman Michael Green. Prices rose because of rising ethanol prices, whose supply decreased this winter due to extreme weather causing significant railroad delays. However, ethanol supplies have begun to rise and AAA predicts gasoline prices will be cheaper for the remainder of this year and could potentially drop to as low as $3.30 per gallon by June. A sizeable drop in gasoline prices could provide a boost to consumer spending in the coming months.
Janet Yellen, the new U.S. Federal Reserve Chairwoman, rattled markets less than two weeks ago by implying a sooner-than-expected rise in interest rates after a Fed policy meeting. However, yesterday, she made clear at a speech in Chicago that the Fed intends to keep interest rates low until the market is much stronger. She said “while there has been steady progress, there is also no doubt that the economy and the job market are not back to normal health.” She went on to list five reasons that she sees continuing slack in the U.S. economy, including seven million part-time workers that would prefer to be in full-time jobs. Ms. Yellen’s quick re-messaging of her previous comments implies that she wants capital markets to continue to view the Fed as being unusually accommodative.