US Fed rate hike could come ‘soon’, chair says

By Ovunc Kutlu

NEW YORK (AA) – The Federal Reserve may increase its benchmark interest rate "relatively soon", the central bank's head, Janet Yellen, said Thursday.

"The U.S. economy has made further progress this year," towards the Fed's objectives of maximum employment and price stability, Yellen said in testimony before a joint economic committee of Congress.

The U.S. added an average of 180,000 jobs per month from January through October and the unemployment rate stood at 4.9 percent in October, which suggests the economy "has had a bit more 'room to run' than anticipated earlier", she said.

"U.S. economic growth appears to have picked up from its subdued pace earlier this year ... consumer spending has continued to post moderate gains," she added.

Inflation increased 1.25 percent in the last 12 months ending in September -- higher than earlier this year, but still below the Fed's 2 percent target.

Yellen said she expects economic growth to continue at "a moderate pace" to further strengthen the labor market, while job gains and low crude oil prices should continue to support consumer spending, suggesting that the Fed's 2 percent inflation target could be met in the next two years.

Despite economic progress, the Fed did not raise interest rates in seven of its meetings this year but repeatedly said it is awaiting stronger macroeconomic data.

"Waiting for further evidence does not reflect a lack of confidence in the economy," Yellen noted, adding that the Fed "judged that there was somewhat more room for the labor market to improve".

She warned, however, that waiting too long to implement a rate hike could force the Fed to make multiple rate hikes "abruptly" and that could "encourage excessive risk-taking and ultimately undermine financial stability". The Fed's final meeting of the year will be held on Dec. 13-14.

Yellen said the Fed may "perhaps adjust our outlook" according to new economic policies adopted by the incoming Donald Trump administration.

She advised Congress and the new government to "choose policies that would improve long-run growth and productivity outlook".

Trump criticized Yellen for the Fed's policies during his campaign and said he would replace the Fed chair after her four-year term ends in February 2018.

Yellen told lawmakers she intends to complete her term.