Interest rate hike could be coming

“Thus, while labor market conditions have improved substantially, they are, in the FOMC’s judgment, not yet consistent with maximum employment”, she said.

She was optimistic that inflation would continue to inch upward.

Yellen did however, include an explicit defense of the Fed’s “transparency and accountability”, detailing the central bank’s flow of information to financial markets and its press conference and audit schedules as evidence it does not need further congressional oversight.

“But 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”, she added. And if the improvements stay on track, the Fed likely will start raising interest rates later this year.

According to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, all USA banks with assets over 50 billion USA dollars are classified as systemically important financial institutions, which should be subject to tough regulatory rules.

Yellen faced a particularly sharp rebuke from a Republican lawmaker unhappy over the Fed’s refusal to hand over documents subpoenaed by the committee.

Relief was the dominant sentiment across European markets, ahead of the European Central Bank’s monthly policy meeting later in the day, as Greece’s approval of the painful measures lessens the likelihood of Athens’s immediate exit from the euro zone. At the meeting, officials were divided on whether it would be one, two or three interest rate hikes this year.

“Impending rate hikes, reiterated by Yellen lately in the midst of the global deflationary environment, noting yesterday’s disappointing retail sales, appears to be a primary pressure factor on gold”, said Mike McGlone, director of research for ETF Securities in New York. He said that more market participants are now betting on a U.S. rate hike in September, while the past dominant prediction over the timing would be December or next year. The euro, already beaten down overnight against the dollar by Yellen’s rate views, showed limited reaction to the Greek vote outcome which did not surprise many in the market.

The economy seems to be bouncing back from a long, harsh winter, as stated by Federal Reserve Chair Janet Yellen.

Yellen’s semi-annual testimony to the US House of Representatives at 1400 GMT is likely to reiterate that it will be appropriate to raise interest rates later this year.

“With Greece out of the way, the market is returning to trading on other themes, and those are the decline in oil prices and a stronger dollar”, Rajan said.