Interest rate hike coming this year, Fed chair Janet Yellen says in upbeat speech

Janet Yellen, chair of the U.S. Federal Reserve, speaks during a news conference following a Federal Open Market Committee (FOMC) meeting in Washington, D.C., U.S., on Wednesday, Sept. 17, 2014.

Federal Reserve Chair Janet Yellen said she still expects to boost interest rates this year if the economy meets her forecasts, having a gradual pace of tightening to follow along with.

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While the labor market is nearing full strength, \”we are not there yet,\” she said Friday in a speech in Providence, Rhode Island.

\”If the economy continues to improve when i expect, I think it will be appropriate sooner or later this year to accept initial step to raise the federal funds rate,\” she said.

Even after the first rate increase since 2006, \”I anticipate that the pace of normalization is likely to be gradual,\” Yellen, 68, said.

Echoing the Fed\’s April statement, Yellen said she expects the economy to return to a \”moderate\” pace of growth after a disappointing first quarter as headwinds together with a cooling global economy gradually abate.

It\’s clearly likely to be one of the most dovish tightenings you\’ll ever see, when it comes

\”It\’s clearly likely to be one of the most dovish tightenings you\’ll ever see, when it comes, because the Fed wants to make clear they\’ll still be very accommodative,\” said Dana Saporta, U.S. economist at Credit Suisse Group AG in New York.

U.S. stocks erased losses following Yellen\’s remarks, using the Standard & Poor\’s 500 Index rising under 0.1 percent to 2,131.22 by 1:46 p.m. in New York. The yield around the benchmark 10-year Treasury note was up two basis points, or 0.20 percentage point, or 0.02 percentage point, to two.21 percent.

Yellen repeated that policy isn\’t on the pre-set course and also the Fed may tighten faster if the economy performs much better than expected or raise rates in a slower pace whether it disappoints. Delaying the first rate increase until employment and inflation go back to the Fed\’s objectives \”would risk overheating the economy,\” Yellen said.