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Federal Reserve Chair Yellen says U.S. on path to interest rate hike this year

By Amy R. Connolly
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Federal Reserve Board Chairwoman Janet Yellen testifies on monetary policy and the state of the economy during a House Financial Services Committee hearing on Capitol Hill in Washington, D.C. on July 15, 2015. Photo by Kevin Dietsch/UPI
Federal Reserve Board Chairwoman Janet Yellen testifies on monetary policy and the state of the economy during a House Financial Services Committee hearing on Capitol Hill in Washington, D.C. on July 15, 2015. Photo by Kevin Dietsch/UPI | License Photo

WASHINGTON, July 15 (UPI) -- Federal Reserve Chair Janet Yellen expects the U.S. economy to continue to strengthen through the end of 2015, putting the Fed on track to raise interest rates later this year.

Yellen told the House Financial Services Committee on Wednesday the labor markets are expected to steadily improve with little effect from overseas turmoil. She gave no hint on a time frame about raising short-term interest rates that have been near zero since 2008, but analysts say it could happen as soon as September. The rate helps determine the cost for credit for key items including cars, mortgages and small-business loans.

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She said the U.S. has made progress but the labor market conditions are "not yet consistent" with maximum employment. While the unemployment rate has fallen to 5.3 percent in June from 10 percent in 2009, a large number of workers have simply stopped looking for jobs. Wage growth "continues to be relatively subdued," she said.

"Prospects are favorable for further improvement in the U.S. labor market and the economy more broadly," she said in her semi-annual monetary policy report. The Fed "expects U.S. GDP growth to strengthen over the remainder of this year and the unemployment rate to decline gradually."

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Yellen, notably more optimistic compared to her appearance in February, said growth could happen even more quickly in the second half of the year as the effects of inexpensive gasoline bolsters the economy.

"Many households have both the wherewithal and the confidence to purchase big-ticket items," she said.

Yellen also faced sharp criticism from Republicans, including Rep. Sean Duffy, R-Wis., for not fully cooperating with a 2012 investigation into an information leak. Yellen said proposals to increase congressional oversight of the central bank would cause a break down in the broader economy.

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"Efforts to further increase transparency, no matter how well-intentioned, must avoid unintended consequences that could undermine the Federal Reserve's ability to make policy in the long-run best interest of American families and businesses," she said.

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