Interest rate hike likely by year-end, saya US Fed Chair Janet Yellen

Global Monetary Fund (IMF) earlier this month had however advised Federal Reserve against increasing the interest rates this year and keep it between the current 0% and 0.25%.

Yellen said the US central bank remains on track to raise interest rates this year, with labour markets expected to steadily improve and turmoil overseas unlikely to throw the US economy off track.

Yellen repeated her view that the Fed will likely hike interest rates this year if the US economy expands as expected.

Federal Reserve Chairman Janet Yellen said Wednesday that she is encouraged by signs that the us economy has been reviving since winter.

Fed watchers say a September rate hike is on the table, but geopolitical uncertainties such as the Greek debt crisis might compel the central bank to wait until December.

“She made it clear the Fed does want to raise rates at some point this year”, said Donald Ellenberger, who oversees about $10 billion as head of multi-sector strategies at Federated Investors in Pittsburgh.

Still, she sounded a note of optimism, saying that “economic growth overseas could also pick up more quickly than observers generally anticipate, providing additional support for USA economic activity”.

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

The Federal Reserve has set two conditions for raising rates, according to Yellen.

The US Fed Chair said that the inflation in United States economy was in control and the employment had improved. “Will the normalization of asset allocations (especially involving less liquid securities) that accompany the Fed’s interest rate normalization process (even one with a very gradual increase) be so “large and lumpy” as to overwhelm current market making capabilities?”

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.

“However, these measures – as well as the unemployment rate – continue to indicate that there is still some slack in labor markets”. Those affect saving, investment, exports and other components of the economy.

She is scheduled to testify before the Senate banking committee on Wednesday.

At the same time, she warned against “measures that affect the ability of policymakers to make decisions about monetary policy free of short-term political pressure”.