US Fed likely to raise interest rates later this year, Yellen tells Congress
Federal Reserve Chair Janet Yellen says if a number of encouraging signs that the economy is reviving stay ontrack, the Fed will likely start raising interest rates later this year.
Federal Reserve Chair Janet Yellen sees a number of encouraging signs that the economy is reviving after a brutal winter and says if the improvements stay on track, the Fed will likely start raising interest rates later this year.
Delivering the Fed’s mid-year economic outlook to Congress, Yellen said on Wednesday the importance of the first rate hike should not be over-emphasised because interest rates are likely to remain at very low levels “for quite some time after the first increase.”
If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds target
The Fed’s benchmark rate has been at a record low near zero since December 2008, meaning that borrowing rates for consumers and businesses have been at historic lows.
Many economists believe the Fed’s first rate hike will occur in September, but they see at most only two quarter-point moves this year.
“If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds target,” Yellen said in prepared remarks. The funds rate, the Fed’s key policy lever, has not been lifted in nearly a decade.
Yellen stressed that her outlook is based on the expectation that the labour market will continue to improve and inflation will begin to move closer to the Fed’s 2 per cent target for annual price gains. Inflation is currently running lower than the pace the Fed believes is optimal for a healthy economy.