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U.S. Fed chief says appropriate to raise interest rate this year

Xinhua, September 29, 2016 Adjust font size:

U.S. Federal Reserve chairwoman Janet Yellen said on Wednesday that most of her colleagues see it appropriate to raise interest rate this year if the economy continues on current path.

"Many of my colleagues indicated in their recent projections, the majority that they would see it as appropriate to make a move to take a step in that direction (removing monetary accommodation) this year if things continue on the current path and no significant new risks arise," Yellen said before the U.S. House financial services committee on Wednesday.

She said that she has been "pleasantly surprised" to see unemployment rate did not fall further along with the robust job growth. The job creation has been at a pace of about 180,000 per month this year, while the unemployment rate remained around 4.9 percent, little changed this year.

With the accommodative monetary policy, "continued job creation at that pace would cause the economy to overheat and would push the unemployment rate down to lower level for now," said Yellen.

She warned of the risk of allowing the economy to overheat which could force the Fed to raise interest rates more rapidly and jeopardize the central bank's efforts to promote maximum employment and price stability.

The U.S. Fed kept the interest rate unchanged last week and said it will need more evidence that the inflation and job market continue to improve before raising rates.

Yellen said on Wednesday that there has no significant upward pressure on inflation and the unemployment rate has not fallen further.

But she stressed that there's no fixed time table for interest rate hikes.

In her testimony, Yellen also said that the central bank is considering making changes to annual stress tests. According to the Fed chief, the current capital buffer would be replaced with a risk-sensitive, firm-specific buffer, which would result in a "significant aggregate increase in capital requirements" for the eight largest U.S. banks.

Yellen also calls for regulatory relief for community banks, which includes alleviating appraisal requirements burdens and simplifying regulatory capital requirements. Enditem