Federal Reserve Chair Janet Yellen said she’s confident in the outlook for economic growth and warned that waiting too long to end the era of near-zero interest rates could force the central bank to tighten too quickly, which would risk disrupting financial markets and the six-year expansion.
“Were the FOMC to delay the start of policy normalization for too long, we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals,” Yellen told the Economic Club of Washington on Wednesday. “Such an abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession.”
Her comments are the latest sign that the policy-setting Federal Open Market Committee is poised to raise interest rates for the first time since 2006 at its Dec. 15-16 meeting in Washington. Fed officials have been trying to gauge whether the economy is headed toward their goals and can sustain growth as rates increase.