Fed Chairwoman Janet Yellen Sees Stronger Case for Interest-Rate Increase

Central banker said, ‘I believe the case for an increase in the federal funds rate has strengthened in recent months’.

Federal Reserve Chairwoman Janet Yellen signaled growing conviction that the central bank will raise short-term interest rates in the weeks or months ahead.

“In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months,” Ms. Yellen said in remarks delivered here Friday.

The remarks left the door open for a Fed rate increase at its Sept. 20-21 policy meeting, but the chairwoman hedged her comments in ways that give the central bank an out if economic data disappoint in the next few weeks.

Most important, the Fed’s decision appears to hinge on whether the Labor Department’s Sept. 2 jobs report shows steady gains in hiring. Job gains have averaged 190,000 a month over the past three months.

“Our decisions always depend on the degree to which incoming data continues to confirm the [Fed’s] outlook,” she said. If the Fed doesn’t move in September, it has two more meetings this year, one in November just before U.S. elections and another in December. Her comments suggest she expects a move at one of these meetings if the central bank doesn’t raise rates in September.

Investors seem to have been cheered by Ms. Yellen’s modest optimism about the economic outlook. Stocks rose …. UPDATE: Stocks Slide as Investors Digest Yellen’s Remarks

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