The Federal Reserve will likely raise interest rates even before inflation hits the central banks 2 percent target, Fed Chair Janet Yellen said Thursday in testimony before the Congressional Joint Economic Committee.
“Were the FOMC to delay the start of policy normalization for too long, we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals,” Yellen told lawmakers on Capitol Hill.
“Such an abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession.”
She said that the economic data since October is in line with the central bank’s projection of an improved job market, signalling the Fed is ready to raise rates at their December 15-16 meeting.
“Holding the federal funds rate at its current level for too long could also encourage excessive risk-taking and thus undermine financial stability,” she said.
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