Waiting too long to raise interest rates “would be unwise,” Federal Reserve Chairwoman Janet Yellen told a Senate panel Tuesday, because a faster hike later in the cycle “could risk disrupting financial markets and pushing the economy into recession.”
Presenting the Federal Reserve's semiannual monetary policy report to Congress, Ms. Yellen told the Senate Committee on Banking, Housing and Urban Affairs that most members of the Federal Open Market Committee expect “a few” rate hikes this year, with a median expectation of three increases at the group's remaining seven meetings in 2017.
Still, she said, rates will remain low by historical standards, and she cautioned that “the economic outlook is uncertain,” particularly before specific economic policy actions are taken.
“It was increasingly clear that March is firmly on the table in terms of a possible rate hike,” said Rick Rieder, BlackRock (BLK)'s chief investment officer of global fixed income, commenting on Ms. Yellen's testimony.
Market confidence in a hike is growing, said Myles Clouston, senior director at Nasdaq Advisory Services. “The underlying strength of the market is continuing to show that we will see a rate hike. Certainly March is not off the table,” said Mr. Clouston, who noted Ms. Yellen's concern about not getting caught behind the curve and having to raise rates too quickly later.
Ms. Yellen presents the semiannual report to the House Financial Services Committee on Wednesday. The report is on the Federal Reserve's website.