WASHINGTON — Federal Reserve Chair Janet Yellen told Congress on Thursday that an improving U.S. economy has strengthened the case for raising interest rates. Her comments were seen as boosting the likelihood of a rate hike in December, as the country prepares for President-elect Donald Trump to take office.
Yellen also said it was "fully my intention" to remain as Fed chair until her term ends in January 2018. She said she could not imagine any circumstance that would cause her to leave early, addressing speculation that she might step down under Trump, given his critical comments of her during the election campaign.
In her testimony to a congressional committee, Yellen noted that the job market has made further improvement this year and that inflation, while still below the Fed's 2
She told the committee that reports that have come out since the Fed met in early November show that the economy has continued to make good progress in achieving the goals the Fed wants to see before it raises rates again.
Yellen said that delaying a hike in the policy rate, known as the federal funds rate, for too long could require the Fed to raise rates "relatively abruptly," which would raise the risks of a recession.
"Holding the federal funds rate at its current level for too long could also encourage excessive risk-taking and ultimately undermine financial stability," Yellen said in her testimony to the Joint Economic Committee.
A group of reports released Thursday should provide support for Fed officials seeking to raise rates.
The government said home construction soared by 25.5
As she has done before, Yellen stressed that future rate hikes will likely be gradual, largely because the Fed thinks economic conditions do not require rates to go as high as the Fed has pushed them in years past. Since this economic recovery began in mid-2009, the economy has averaged growth of just 2
Fed officials think slower growth, caused in part by weak gains in worker productivity, and the absence of high inflation pressures will allow the Fed to keep its benchmark rate lower than in previous economic recoveries.
"Gradual increased in the federal funds rate will likely be sufficient to get to a neutral policy stance over the next few years," Yellen said.
Next month, if it the Fed raises rates as expected, it will be its first move since December of last year, when it raised its key rate from a record low near zero, where it had been for seven years. The December meeting will include a news conference by Yellen, when she will be able to explain the Fed's action and perhaps provide guidance on how many further rate increases it foresees in 2017.
As measured by the gross domestic product, the economy grew at a 2.9
The housing market, whose meltdown triggered the 2008 financial crisis and the recession, has largely recovered, though. Still, the sharply higher bond yields that have followed Trump's election, if they continue, would mean higher mortgage rates that could depress home purchases.
Even so, stronger economic growth and a recent uptick in inflation have bolstered the argument of Fed officials who have been pushing for a rate hike.
Martin Crutsinger, The Associated Press