The Federal Reserve will raise interest rates gradually once it begins to tighten monetary policy, Federal Reserve Chair Janet Yellen assured lawmakers Wednesday morning.
“We have a recovering economy….households are in better shape,” she told a House Financial Services panel.
Asked about whether raising rates will hurt home buying demand, Yellen insists that slow, modest increases will not derail the recovery in the U.S. housing market.
A December rate hike remains a possibility despite signs the economy is slowing for the third winter in a row.
“If the incoming information supports that expectation, then or statement indicates that December would be a live possibility,” she said.
“Now no decision has been made on that and, what it will depend on, is the [Federal Open Market Committee’s] assessment at the time. That assessment will be informed by all of the data that we collect between now and (the December meeting).”
The benchmark interest rate has been at effectively zero since 2009, part of the central bank’s efforts to guide the economy through the worse recession in decades.
Yellen’s appearance on Capitol Hill was ostensibly to address the Fed’s role in banking regulation.
The financial health of of the largest U.S. banks “has strengthened considerably” since the crisis of 2008, she said.
However, Yellen warns the so-called too-big-to-fail banks continue to have “substantial compliance and risk-management issues.”
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