Investing.com - Federal Reserve Chair Janet Yellen said raising interest rates gradually is the most appropriate policy measure amid uncertainty over the pace of inflation.
“It would be imprudent to keep monetary policy on hold until inflation is back to 2 percent,” Fed chair Janet Yellen said Tuesday.
Yellen also expressed concerns that the slowing pace of inflation could force rates to remain lower for longer, reducing the central bank’s ability to ease monetary policy at times of market distress.
"Sustained low inflation such as this is undesirable because, among other things, it generally leads to low settings of the federal funds rate in normal times, thereby providing less scope to ease monetary policy to fight recessions," Yellen said.
Yellen balanced her somewhat dovish comments, warning that the Federal Reserve should be "wary of moving too gradually" on interest rates as keeping its loose monetary policy measures in place for a prolonged period, increases the risk of the economy overheating.
At the press conference following the FOMC meeting last week, Yellen downplayed the significance of the weak core inflation data as the central bank signaled that an additional rate hike this year remained appropriate.
The dollar rose 0.51% to trade at 92.91 while the U.S. 10-Year rose sharply to 2.241, up nearly 1%.
Gold Futures fell to $1,300.39.