Federal Reserve Chairwoman Janet Yellen on Friday said she saw signs the economy was improving and expects a rate hike will be needed this year. "I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalizing monetary policy," she said. In a speech to The City Club of Cleveland, Yellen was upbeat about the outlook, laying out her view of a U.S. economy close to the point of achieving a virtuous circle, where job gains lead to stronger consumer spending which then sparks more employment and wage gains. Yellen said she saw "hints" of wage gains in the recent data and "encouraging" data that consumer spending is picking up. "My own outlook for the economy and inflation is broadly consistent with the central tendency of the projections submitted by FOMC participants at the time of our June meeting," Yellen said. That forecast called for the economy to grow close to 2% this year, the unemployment rate near 5.2% and core inflation at 1.4%. Yellen said she thought the recent effects of low oil prices and the strong dollar on inflation would wane during this year and inflation would move up toward the Fed's 2% annual rate target.
Copyright © 2015 MarketWatch, Inc.
Continue Reading Below