Yellen: Case for Increasing Fed Funds Rate ‘Has Strengthened’

As the U.S. economy continues to expand, Federal Reserve Chairman Janet Yellen today said that she anticipates gradual increases in the federal funds rate over the next few years. She added that the Federal Open Market Committee expects to see continued moderate growth in real GDP, additional strengthening in the labor market and inflation rising to 2 percent over that timeframe.

Yellen cautioned, however, that any decision to raise interest rates would be dependent on the degree to which incoming data continues to confirm the FOMC’s outlook. “As ever, the economic outlook is uncertain, and so monetary policy is not on a preset course,” Yellen said. “Our ability to predict how the federal funds rate will evolve over time is quite limited because monetary policy will need to respond to whatever disturbances may buffet the economy.”

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Monica C. Meinert

Monica C. Meinert is deputy editor of the ABA Banking Journal and a senior editor at the American Bankers Association, where she oversees ABA Daily Newsbytes.