Fed’s Yellen: December is ‘live possibility’ for first interest-rate increase

by BenLeubsdorf

Reuters

Federal Reserve Board Chairwoman Janet Yellen testifies before the House Financial Services Committee on the "Federal Reserve's Supervision and Regulation of the Financial System."

WASHINGTON--Federal Reserve Chairwoman Janet Yellen said the U.S. central bank may raise short-term interest rates at its mid-December meeting, but emphasized no decision has yet been made.
The Fed expects “the economy will continue to grow at a pace that’s sufficient to generate further improvements in the labor market and to return inflation to our 2% target over the medium term, and if the incoming information supports that expectation, then our statement indicates that December would be a live possibility,” Yellen said Wednesday while testifying before the House Financial Services Committee. “But importantly, we’ve made no decision about it.”
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The Fed has kept its benchmark short-term interest rate, the federal-funds rate, pinned near zero since December 2008. Yellen said in late September that she and most other policy makers “anticipate that it will likely be appropriate to raise the target range for the federal-funds rate sometime later this year and to continue boosting short-term rates at a gradual pace thereafter as the labor market improves further and inflation moves back to our 2% objective.”
Yellen said Wednesday that “moving in a timely fashion, if the data and the outlook justify such a move, is a prudent thing to do because we will be able to move at a more gradual and measured pace. We fully expect that the economy will evolve in such a way that we can move at a very gradual pace, and of course, after we do so, we will be watching very carefully whether our expectations are realized.”
An expanded version of this story is available at WSJ.com