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Get Ready for Possible Higher Interest Rates
Wednesday, February 15, 2017 6:45 AM

Federal Reserve Chair Janet Yellen signaled that the next rate hike could come as early as March in her testimony before the U.S. Senate Banking Committee on Tuesday. She stressed that the U.S. economy is doing pretty well and has "continued to make progress." She called the U.S. job market strong and said prices are moving up at a faster pace.

"Waiting too long to remove accommodation would be unwise," Yellen told the Senate. "At our upcoming meetings, the committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate."

Yellen's words were widely interpreted as a strong hint the Fed might raise in March. The next Fed meeting is March 14-15.

The U.S. 10-year bond yield rose immediately after Yellen's statement from 2.44 percent to 2.5 percent. That will likely cause mortgage rates to jump soon as well.

The Fed currently predicts three rate hikes in 2017. That said, the Fed began 2016 predicting four rate hikes and ended up doing only one.

Uncertainty about President Trump is pushing Wall Street to doubt the Fed will hike rates in March. Yellen admitted she's not sure what Trump and the Republican-led Congress will do so the Fed is in wait-and-see mode.

"Some of the policies being discussed may raise deficits," she told the senators. "It's not a simple matter to evaluate." She went on to say the Fed didn't have "enough clarity" yet on what policies will actually be enacted.

Source:  CNN Money