US economy close to Fed's goals, chair Yellen says

By Ovunc Kutlu

NEW YORK (AA) – After struggling for seven years with a recession, the U.S. economy is close to the Federal Reserve's goals, Chair Janet Yellen said Wednesday.

The 2008 financial crisis erased around 9 million jobs and saw the unemployment rate rise to 10 percent in late 2009. The Fed cut interest rates to near zero at the end of 2008 and kept it there for seven years.

Now that the economy is believed to be much stronger by the Fed, the bank can begin increasing interest rates gradually, according to Yellen.

The American economy reached near maximum employment, added around 15.2 million new jobs, and unemployment rate has fallen below 5 percent, Yellen noted at the Commonwealth Club in San Francisco.

"The Fed's goal is to promote financial conditions conducive to maximum employment and price stability,” she said. “So where is the economy now, in relationship to them? The short answer is, we think it's close," she added.

Yellen said the Fed Board in Washington and the central bank's 12 regional presidents are expecting to increase the interest rate "a few times a year until, by the end of 2019, it is close to our estimate of its longer-run neutral rate of 3 percent."

The Fed raised its interest rate Dec. 16 by 0.25 percent to 0.50 - 0.75 percent, marking its first rate hike since last December and only the second in a decade.

A 3 percent interest rate would mean the bank may raise rates at least nine more times, if by 25 basis points each time, to meet that goal in the next three years.

The Fed said last month it expects to make three rate hikes this year.