Yellen signals interest rate hike later this year

AMHERST, Mass., Sept. 25 (UPI) -- Federal Reserve Chairwoman Janet Yellen built her argument before a university audience that short-term interest rates should be raised before the end of the year.

In a nearly hourlong speech Thursday on how inflation influenced the Fed's approach to monetary policy, Yellen told a crowd of professors and students at the University of Massachusetts at Amherst that despite last week's decision to leave interest rates near zero, they might not be staying there much longer.

Yellen said the economy has improved enough that the forces of inflation will creep in over the next few years. A strong dollar along with falling energy prices have mostly kept the lid on consumer prices, but won't remain, and "inflation will gradually return to 2 percent over the next two or three years."

To stay ahead of financial volatility, Yellen said the Fed would likely raise short-term rates gradually over the same span, beginning this year.

In December 2008, in the early days of the recession, the Fed cut its benchmark short-term interest rate to nearly zero and has kept it there since.

Yellen, 69, began to stumble over words and had a long pause near the end of her speech and after being seen by on-site medical staff, she resumed her duties. The Fed spokesman later said Yellen felt slightly dehydrated.