Barring an unforeseen setback, the Fed chair suggested Friday the economy is due for a rate hike.
Fed Chair Janet Yellen on Friday voiced confidence in the U.S. economy's progress and suggested the country is likely ready for an interest rate increase in the near future. SUSAN WALSH/AP
Barring an unexpected economic setback, officials at the Federal Reserve appear to be all in on a March interest rate hike – or at least as all in as the typically cautious and cryptic central bankers can be.
Federal Reserve Chair Janet Yellen capped off a long list of public appearances for officials at the Fed who will meet later this month to decide if the U.S. economy is ready for an interest rate hike. In prepared remarks for a speech at the Executives' Club of Chicago, Yellen indicated such a move would "likely be appropriate" if all goes according to plan.
"Indeed, at our meeting later this month, the [Federal Open Market Committee] will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate," Yellen said Friday after praising a labor market that is "in the vicinity of our maximum employment objective" and inflation that is believed to be "rising toward our target."
Yellen isn't typically one to show her hand before she and her colleagues gather in Washington for one of their eight annual meetings. But her comments come after she announced last month she believed a rate hike would be appropriate "fairly soon" and after several of her colleagues earlier in the week hinted that they'd support raising the Fed's benchmark interest rate as soon as later this month.
"In my view, a rate increase is very much on the table for serious consideration at our March meeting," John Williams, who heads the Fed's regional bank in San Francisco, said Tuesday during an appearance before the Santa Cruz Chamber of Commerce.
Meanwhile, Jerome Powell, a member of the Fed's Board of Governors, told CNBC in a Thursday interview that he believes "the case for a rate increase for March has come together, and I think it's on the table for discussion."
Lael Brainard, another member of the Fed's Board, said Wednesday during a speech at Harvard University that she thinks "recent developments suggest that the macro economy may be at a transition" and that "with full employment within reach, signs of progress on our inflation mandate and a favorable shift in the balance of risks at home and abroad, it will likely be appropriate for the committee to continue gradually removing monetary accommodation."
"I actually think we're now much closer to meeting our employment and inflation objectives," Robert Kaplan, president of the Fed's regional bank in Dallas, said during an interview Tuesday on CNBC's "Squawk Box." "Once you've decided that, you need to take advantage of those windows when they present themselves."
He said he believed it would be wise for America's central bank to move on interest rates "sooner rather than later."
Yellen echoed that sentiment Friday, saying she was cognizant of the risk that the Fed waits "too long to scale back some of our support" to the economy by holding off on rate hikes. Such a scenario "could potentially require us to raise rates rapidly sometime down the road, which in turn could risk disrupting financial markets and pushing the economy into recession," she said.
"Having said that, I currently see no evidence that the Federal Reserve has fallen behind the curve, and I therefore continue to have confidence in our judgment that a gradual removal of accommodation is likely to be appropriate," Yellen said Friday.
The Fed's two key priorities – maintaining maximum employment and stable long-term inflation – have made progress in recent months, and an income report published earlier this week suggested Yellen's preferred inflationary tracker was just shy of the central bank's long-term 2-percent inflation target.
With that progress in mind, Yellen hinted Friday that 2017 could be the year the Fed sticks to its rate hike target – central bankers forecast in December that they'd be able to raise rates on three separate occasions by year's end.
"[U]nless unanticipated developments adversely affect the economic outlook, the process of scaling back accommodation likely will not be as slow as it was during the past couple of years," Yellen said.
