Janet Yellen Puts Fed on Path to Lift Rates

Low inflation remains a concern, but economic growth and job gains argue for a move later this year.

Federal Reserve Chairwoman Janet Yellen , sounding upbeat about the economy, laid the groundwork for interest-rate increases later this year.

“The employment situation in the United States has been improving on many dimensions,” Ms. Yellen told the Senate Banking Committee on Tuesday, her first of two days of semiannual testimony before lawmakers. Spending and production had increased at a “solid rate,” she added, and should remain strong enough to keep bringing unemployment down.

If the economy continues to strengthen as the Fed anticipates and officials become more confident that low inflation will rise toward their 2% goal, she said, the central bank “will at some point begin considering an increase in the target range for the federal funds rate.”

With that assessment, Ms. Yellen took an incremental step, shifting the central bank away from promises that interest rates will stay low and toward a discussion of when and how fast they will move up.

Her comments before the Senate panel signaled the Fed still doesn’t expect to raise its benchmark short-term rate from near zero at its March or April meetings. Many Fed officials have said in recent weeks that a midyear rate increase should be on the table, though not certain. Ms. Yellen sought to put the Fed’s shifting pronouncements about rates into perspective.

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