Federal Reserve Chairwoman Janet Yellen said Friday that an increase in the Fed’s interest rate target is likely during the summer.
If job growth and economic growth hold up, Yellen said at an event at Harvard University, “probably in the coming months such a move would be appropriate.”
Yellen did not say specifically whether the Fed would act at its June meeting and reiterated that the Fed would raise interest rates only “gradually and cautiously” when it does.
But she said the economy is “continuing to improve” and that it will be appropriate for the Fed to tighten monetary policy accordingly.
The chairwoman’s comments reinforce recent statements from other central bank officials who have said that it is possible that they might raise interest rates in June, a message that also was hinted at in the recently released minutes from the Fed’s April monetary policy meeting.
Those communications surprised investors, who have significantly raised the odds of a rate hike in June or July.
The Fed held interest rates near zero from 2008 to late 2015 in an effort to counteract the recession. In December, it raised its short-term interest rate target from zero to a range of between 0.25 percent to 0.5 percent.
Investors saw a rate hike by July as more likely than not, as reflected in futures market prices Friday after following Yellen’s comments.
Yellen’s appearance came before the Memorial Day weekend holiday and just before a recommended early close for markets. Her interviewer, Harvard economics professor N. Gregory Mankiw, joked that she would have to keep her comments short in order for traders waiting on her remarks to be able to catch helicopters to the Hamptons for the weekend.
