Yellen: Interest rate hike could come ‘relatively soon’

Federal Reserve Chairwoman Janet Yellen signaled the U.S. central bank is close to lifting interest rates as the economy continues to create jobs at a healthy clip and inflation inches higher.

A rate hike 'could well become appropriate relatively soon if incoming data provide some further evidence of continued progress toward the committee's objectives,” Yellen said in the text of testimony she was scheduled to deliver Thursday in Washington, D.C., before Congress's Joint Economic Committee.

Yellen, who made no mention of the prospective policies of the incoming administration of President-elect Donald Trump, reiterated the expectation of Fed officials that future rate increases will be 'gradual.” Bond prices have fallen and stocks have risen as investors anticipate that Trump's proposals to cut taxes and boost infrastructure and military spending will lead to faster inflation and stronger growth.

'Yellen's testimony ignored the very real possibility of substantial fiscal stimulus next year,” Ian Shepherdson, chief economist at Pantheon Macroeconomics Ltd., said in a note. She 'does not want the Fed to become even more of a political punch bag than it is already.”

Yellen's remarks will serve to cement expectations, barring a significant negative shock, for an increase in interest rates when the Federal Open Market Committee gathers in Washington Dec. 13 and 14. Pricing in federal funds futures contracts already imply a greater than 95 percent chance of a quarter-point hike.