Yellen: Economy 'performing well,' December 'live' for rate hike

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Janet Yellen: December Rate Hike a 'Live Possibility'

Federal Reserve Chair Janet Yellen on Wednesday pointed to a December interest rate "liftoff" but a slow path of increases from then on as the central bank continues to nurture an economic recovery.

"What the committee has been expecting is that the economy will continue to grow at a pace that is sufficient to generate further improvements in the labor market and to return inflation to our 2 percent target over the medium term," Yellen said during the question and answer session of a congressional hearing on financial regulation. "If the incoming information supports that expectation then our statement indicates that December would be a live possibility."

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The economy, she said, is "performing well," but the Fed would still take a gradualist approach to raising rates once the first step is taken.

"The whole path matters," Yellen said.

Her remarks are the first since a Fed policy meeting last week in which the central bank gave a stronger-than-expected hint that it will hike rates next month. That would be its first hike in a decade, and an important sign that the Fed feels the economy is returning to normal after the worst downturn since the Great Depression.

Her comments pushed bond yields higher and also caused investors to reset their expectations of a December rate hike above 60 percent - a sign that markets are finally taking the Fed's language seriously.

(Reporting by Howard Schneider; Additional reporting by Jason Lange and Jonathan Spicer; Editing by Andrea Ricci)

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