WASHINGTON – Federal Reserve Chair Janet Yellen said before the Senate on Tuesday that if the U.S. economy continues to improve the Fed will start considering hiking interest rates on a “meeting-by-meeting basis.”
Yellen said that the elimination of the word “patient” to describe the Fed’s position vis-a-vis a potential hike in rates, which currently stand between zero and 0.25 percent, does not mean anything other than that the central bank considers the time to think about raising rates to be coming “soon.”
The Fed chief made her remarks in her semiannual economic report to Congress, appearing in person before the Senate Banking Committee.
“If economic conditions continue to improve, as the (Federal Reserve Open Market) Committee anticipates, the Committee will at some point begin considering an increase in the target range for the federal funds rate on a meeting-by-meeting basis. Before then, the Committee will change its forward guidance,” Yellen said in her prepared remarks to the senators.
The most recent macroeconomic figures show that the economic recovery is continuing, with unemployment at the end of January standing at 5.7 percent, the lowest level since 2008, and 2.4 percent growth in the GDP during 2014, the biggest since 2010.
Nevertheless, the figure that the Fed is watching most closely at present is inflation, having established a 2 percent annual objective. In January, the annualized rate of inflation was only 0.7 percent, however, primarily due to low oil prices, a situation the Fed considers to be temporary.
Analysts believe that a Fed rate hike, which will be the first since 2008, will probably come at the central bank’s June meeting.