WASHINGTON (2/25/15)--An improving economy is cause for optimism, said Federal Reserve Chair Janet Yellen Tuesday, but the Fed will remain patient when it comes to raising interest rates.
Speaking before the Senate Banking Committee for her semiannual monetary policy update, Yellen did break down how the Fed would go about raising rates.
"The [Federal Open Market] Committee (FOMC) considers it unlikely that economic conditions will warrant an increase in the target range for the federal funds rate for at least the next couple of FOMC meetings," she said. "If economic conditions continue to improve, as the 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."
Yellen added that interest rates would likely be raised when inflation appears headed toward the Fed's goal of 2%.
An unemployment rate of 5.7% (down from 6% in the summer of 2014 and 10% in late 2009), increased domestic spending and production are all reasons for optimism, Yellen said. She tempered that by explaining that recent declines stem from "disappointing" foreign growth and changes in foreign money policy.
She also said that while the drop in oil prices would likely negatively affect producers, it will likely be "a significant overall plus, on net, for our economy" due to the average consumer spending less on gasoline, and more on other goods and services.
Yellen will testify before the House Financial Services Committee at 10 a.m. (ET) today. The hearing will be streamed live on the committee's website.