Fed chair: One rate hike 'appropriate' this year

NEW YORK (AA) – It is "appropriate" to have one rate hike this year, Federal Reserve Chair Janet Yellen said Wednesday after the bank kept its benchmark interest rate unchanged.

"I would expect to see [a rate increase] this year if we continue on the current course," she said, referring to if improvements in labor market conditions continue and the economy avoids any major risks.

"We are generally agreed that gradual increases in the federal funds rate to remove what is a modest degree of accommodation will be appropriate," she said.

Yellen stressed that the U.S. economy is progressing, close to a sustainable unemployment rate below 5 percent and in time the inflation rate is expected to rise to the Fed's 2 percent goal.

The Federal Open Market Committee (FOMC) voted 7-3 Wednesday in favor of keeping the rates unchanged, but Yellen said "there is less disagreement among participants in the committee than you might think."

The FOMC noted in its statement before Yellen's speech that it "judges that the case for an increase in the federal funds rate has strengthened," signaling a rate hike could come before the end of the year.

After not making a rate hike at its last six meetings, the bank’s credibility is under scrutiny after investors and experts anticipated as much as four rate hikes in 2016.

The central bank has two more shots to make a rate hike this year -- right before the U.S. presidential elections on Nov. 8 and Dec. 14.

Most experts believe the bank would wait until after the elections to increase rates, which would also allow it to examine more incoming data to assess the well-being of the overall economy.