Federal Reserve prepared to hike rates even if average pay fails to rise much

Associated Press

Federal Reserve Chair Janet Yellen says the broad pay increases usually associated with job growth may not occur anytime soon.

Yellen said the Fed will not necessarily wait for wages to rise at a faster pace before it raises a key interest rate from its current near-zero level.

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"We may not see wage growth pick up," Yellen told reporters Wednesday after a meeting of top Fed officials.

The near-zero rate is meant to encourage borrowing, spending and investing in ways that fuel stronger economic growth. Fed officials expect the 5.5 unemployment rate to drop as low as 5 percent by the end of this year.

But their forecasts for economic growth indicate modest wage gains. Average hourly wages have increased a tepid 2 percent over the past 12 months.