Janet Yellen on Friday signaled that an interest rate hike in this month’s monetary policy will likely be appropriate, if the economy progresses in line with officials’ expectation.
“At our meeting later this month, the (Federal Open Market) Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate,” said Yellen in a speech at the Executives’ Club of Chicago.
The Fed is scheduled to hold its next monetary policy meeting on March 14 and 15.
Yellen gave an upbeat assessment of the economy: the unemployment rate was at 4.8 percent in January, in line with Fed officials’ estimates of longer-run normal level; economic outlook seems encouraging with risks from abroad receding; and inflation rate is rising nearly 2 percent, the Fed’s target, in January.
“With the job market strengthening and inflation rising toward our target, the median assessment of FOMC participants as of last December was that a cumulative 3/4 percentage point increase in the target range for the federal funds rate would likely be appropriate over the course of this year,” said Yellen.
Yellen also warned that waiting too long to raise interest rates could force the central bank to act quickly in response to economic risks, which in turn could risk disrupting financial markets and pushing the economy into recession.
She said that the process of removing accommodation likely will not be as slow as it was during the past couple of years, if the economy is not adversely affected by unanticipated developments.
Other Fed policymakers, including New York Fed President William Dudley and Fed governor Lael Brainard, said recently that it would be appropriate for the Fed to move rates soon, as the economy is close the full employment and 2 percent inflation target.
Yellen’s remarks on Friday reinforced the market expectation that the central bank will likely act in its March meeting.
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