Yellen Sticks To Forecast Of Rate Hike This Year, Followed By Gradual Moves

MarketWatch Pulse

The Federal Reserve will likely raise interest rates this year, if the economy improves as expected, and the pace of future hikes will be gradual, Federal Reserve Chairwoman Janet Yellen said Friday. Her comments essentially stick to the message she has sent since the beginning of the year. In a speech to the Chamber of Commerce in Providence, R.I., Yellen said the economy would pick up from the slow pace of growth seen in the first quarter. The Fed chairwoman said the slim 0.2% increase in first quarter GDP was partly due to a variety of transitory factors and maybe even some "statistical noise." But the economy would still face some struggles due to persistent slow pace of business investment and weak investment in the energy sector, and the outlook is "highly uncertain," Yellen said. This means that it will be several years before the federal funds rate would be back to its normal, longer-run level, she said, which Fed officials now estimate is slightly above 3.5%.

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