WASHINGTON (7/16/15)--The Federal Reserve remains on track to raise interest rates this year, as long as the economy continues to improve. That’s the message Fed Chair Janet Yellen told members of the House Financial Services Committee Wednesday in her semiannual report to Congress.
“Let me emphasize again that these are projections based on the anticipated path of the economy, not statements of intent to raise rates at any particular time,” Yellen told the committee. “A decision by the Committee to raise its target range for the federal funds rate will signal how much progress the economy has made in healing from the trauma of the financial crisis. That said, the importance of the initial step to raise the federal funds rate target should not be overemphasized.”
She added that the stance of monetary policy will likely remain “highly accommodative for quite some time” after the first increase in the federal funds rate, in order to support continued progress toward the goal of 2% inflation and maximum employment. (See related story: Economy expands in all 12 districts: Beige Book)
“Of course, if the expansion proves to be more vigorous than currently anticipated and inflation moves higher than expected, then the appropriate path would likely follow a higher and steeper trajectory; conversely, if conditions were to prove weaker, then the appropriate trajectory would be lower and less steep than currently projected,” Yellen said.
Citing low oil prices and ongoing employment gains, Yellen said consumer spending would likely continue to rise, and certain factors that might temper this rise, such as the effects of dollar appreciation, should diminish over time. (See related story: Economy expands in all 12 districts: Beige Book)
“As a result, the Federal Open Market Committee expects U.S. GDP growth to strengthen over the remainder of this year and the unemployment rate to decline gradually,” she said, adding the Greek economic situation and the Chinese market volatility are the most likely foreign developments to affect growth.
Yellen also said, in response to a question about the status of the Fed’s emergency lending proposal, that a final rule would likely be issued in the fall. First proposed in late 2013, the changes are designed to ensure that any emergency lending program is for the purpose of providing liquidity to the financial system, and not to aid an individual failing financial company.