Federal Reserve Chair Janet Yellen told lawmakers that the U.S. will continue to add jobs at a solid rate, though the recent average pace is probably higher than what’s sustainable over the long term and would eventually cause the economy to overheat.
The current course of the economy calls for a gradual increase in interest rates, something that doesn’t have a fixed timetable, Yellen said Wednesday, speaking before the House Financial Services Committee in an appearance focused mainly on regulation. “If we allow the economy to overheat, we could be faced with having to raise interest rates more rapidly than we would want,” she said.
The Fed, under former Fed Chairman Ben Bernanke and later Yellen, left rates near zero from the end of 2008 through December 2015 as it tried to stoke job growth in the wake of the Great Recession. The central bank raised rates late last year, but it’s delayed a follow-up increase amid overseas risks and as it waited for further evidence that the U.S. economy has healed.
Yellen last week argued that it made sense to put off a move for now amid signs that discouraged Americans who dropped out of the labor market are returning and looking for work, though she also agreed that the case for a rate rise has strengthened.
She reiterated on Wednesday that most members of the policy-setting Federal Open Market Committee expect a rate increase this year. That has economists looking to the Fed’s December meeting — the November gathering comes within a week of the U.S. election and isn’t followed by a press conference.