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Fed rate hike this year

May 22, 2015

Federal Reserve Chair Janet Yellen has insisted the benchmark funds rate would likely be raised before the year is over. She added investors must start accepting the inevitable and prepare for the day of truth.

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Fed Chair Janet Yellen REUTERS/Kevin Lamarque
Image: Reuters/K. Lamarque

Fed Chair Janet Yellen said Friday she expected the US central bank to raise interest rates this year as she saw the domestic economy on course to bounce back from a sluggish first quarter.

She said in a speech to a business group in Providence, Rhode Island, that market players had to accept that the fact that the protracted stretch of near-zero interest rates could not continue forever.

Yellen noted that delaying a tightening of monetary policy until employment and inflation hit the central bank's targets risked overheating the economy.

Keeping markets in suspense

"For that reason, if the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target," Yellen said at the Providence Chamber of Commerce.

The Fed chair had signaled as early as March that the central bank would likely raise rates this year despite concerns about a downturn in core inflation and slowed wage growth.

Yellen takes the helm at the Fed

Yellen's remarks on Friday came two days after minutes of the Fed's policy board made clear that slow economic expansion in recent months meant the benchmark funds rate was unlikely to be raised before July.

hg/msh (Reuters, AFP)