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Yellen says she expects Fed to raise rates by year’s end

WASHINGTON – Chair Janet Yellen said Thursday that she expects the Federal Reserve to begin raising interest rates from record lows by the end of the year.

In a lecture at the University of Massachusetts at Amherst, Yellen said she thought inflation would gradually move up to the Fed’s target rate of 2 percent as unusually low oil prices and other factors prove temporary. And she suggested that global economic weakness won’t likely be significant enough to dissuade the Fed from raising its key short-term rate from zero by December.

Yellen’s comments may help clarify doubts about the Fed’s intentions that deepened last week after its latest policy meeting ended. The Fed chose not to raise rates, citing global economic pressures and concern about excessively low inflation.

That decision raised worries that the Fed had greater concerns about economic problems in China and falling stock markets than investors had previously thought.

In her speech Thursday, Yellen said Fed officials continue to monitor economic troubles abroad. But she said officials don’t think those challenges will significantly influence the central bank’s interest-rate decisions.

At a news conference last week, Yellen had avoided saying whether she herself still thought a rate hike would be justified this year. She said she preferred to convey the collective view of the Fed’s policymaking committee, which establishes the central bank’s rate decisions. But on Thursday, Yellen included herself, saying, “Most of my colleagues and I anticipate that it will likely be appropriate to raise the target range for the federal funds rate sometime later this year.”

The Fed has two remaining meetings for this year, Oct. 27-28 and Dec. 15-16. Many economists say they doubt the Fed would have enough new information to be confident about hiking rates in October but say they do expect a move in December as long as nothing unexpected happens to threaten the economy.

“Our base-case scenario is still that the Fed will begin to hike rates in December,” said Paul Ashworth, chief U.S. economist at Capital Economics.

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