Yellen on Likelihood of Rate Increase
The Federal Reserve chairwoman, Janet L. Yellen, said any decision to raise interest rates would be "a testament" to the economy's progress toward recovery.
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WASHINGTON — Janet L. Yellen, the Federal Reserve chairwoman, said Wednesday that economic conditions were ripe for the Fed to start raising its benchmark interest rate this month, a move that appears all but inevitable.
"The economy has come a long way toward the F.O.M.C.'s objectives of maximum employment and price stability," Ms. Yellen said, according to the prepared text of a speech to the Economic Club of Washington, referring to the Federal Open Market Committee.
Ms. Yellen said that when the Fed decided to raise rates, the decision would be "a testament, also, to how far our economy has come in recovering from the effects of the financial crisis and the Great Recession."
"It is a day that I expect we all are looking forward to," she said.
Ms. Yellen underscored that the Fed expected to raise rates slowly, because the economy remained weak. And she said the Fed's policy-making committee would not make a final decision until its meeting Dec. 15 and 16. Fed officials first will have the chance on Friday to see the government's estimate of November job growth.
Six and a half years ago, the Federal Reserve put its benchmark interest rate close to zero, as a way to bolster the economy. But that policy is expected to change.
Still, it appears that Ms. Yellen and her colleagues, who have held the Fed's benchmark rate near zero for almost seven years, have finally concluded that the domestic economy is strong enough to keep growing with less support from the central bank.
Investors and analysts have generally concluded that the Fed is likely to raise its benchmark rate to a range of 0.25 to 0.5 percent. By keeping rates low, the Fed has sought to stimulate economic growth by encouraging risk-taking by investors, and borrowing by businesses and consumers. As it raises rates, the Fed will reduce those incentives.
Ms. Yellen offered an upbeat assessment of economic conditions, although she emphasized that the recovery from the recession remained incomplete. She said that labor markets had improved substantially, and she noted a "welcome pickup" in wage growth.
"I anticipate continued economic growth at a moderate pace that will be sufficient to generate additional increases in employment, further reductions in the remaining margins of labor market slack and a rise in inflation to our 2 percent objective," Ms. Yellen said.
She noted also that some drags on the economy had subsided. The risks from foreign economic events have diminished, and the federal government has gotten out of its own way. Ms. Yellen said she expected government spending would actually contribute to growth in the coming years, a significant change from government's recent role as a roadblock.
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