Yellen says rate hike would be 'appropriate'

Yellen says rate hike would be 'appropriate'
Posted at 12:22 PM, May 27, 2016
and last updated 2016-05-27 15:06:04-04

CAMBRIDGE, Mass. (AP) — Federal Reserve Chair Janet Yellen said Friday that an interest rate hike would be appropriate in the coming months if the economy keeps improving.

While economic growth was relatively weak at the end of last year and beginning of this year, it appears to be picking up now based on recent data, Yellen said during a discussion at Harvard University.

She said she expects the Fed to "gradually and cautiously increase" its key interest rate "and probably in the coming months, such a move would be appropriate."

Anticipation of a rate hike at either the next June meeting or in July have been rising since the Fed last week released the minutes of its discussions at its April meeting. The minutes showed that Fed officials believed the strengthening economy might warrant a rate hike in June.

The minutes caught investors by surprise because they had come to believe the Fed would not move that quickly.

Many private economists still believe a June rate hike isn't very likely. The gathering will take place only a week before British voters decide whether to support a move to leave the European Union. The Fed may be reluctant to raise rates in advance of the British vote. These analysts believe a hike at the July 26-27 meeting is more likely.

Yellen's comments came during an appearance at Harvard University where she was honored with the Radcliffe Medal. She was interviewed by Harvard University economics professor Gregory Mankiw.

Yellen's appearance had been widely anticipated because it was the first time she had spoken publicly since April 8 in New York.

The Fed raised its key policy rate for the first time in nearly a decade in December, pushing the rate from a record low near zero to a range of 0.25 percent to 0.5 percent.

But after increased global weakness and financial market turmoil in January and February, the Fed has kept rates unchanged so far this year. And the Fed indicated in March that it was trimming its estimate of possible rate hikes this year from four to just two.