Fed's Yellen says US still on track for more rate hikes

[NEW YORK] The US economy is on a solid course and still on track to warrant further interest rate hikes, Federal Reserve Chair Janet Yellen said on Thursday.

Speaking at a panel with former chiefs of the US central bank, Ms Yellen said the labour market was "close" to full strength and that inflation was currently held back by temporary factors.

"The US economy has continued to progress in a satisfactory way. We continue to see good job performance, some evidence of inflation moving up, so that was our expectation when we raised rates in December," she said at the International House, a New York non-profit residence for students. "So yes, there is accommodation in the monetary policy that we have. But we think the gradual path of rate increases will be appropriate," Ms Yellen added.

"We are coming close to our assigned congressional goal of maximum employment," she said. Many measures of unemployment, she said, "really suggest a labour market that is vastly improved." Still, Ms Yellen said, other broader measures of underemployment are still "higher than one would expect" and show that some slack remains.

She said most members of the Federal Open Market Committee anticipate unemployment will continue to drop, overshooting what Fed officials see as its lowest sustainable level.

She added that the committee is not aiming for a level that will drive inflation above the Fed's 2 per cent target.

"But it's also the case that 2 per cent is our goal, and it's not a ceiling," she added.

REUTERS/ BLOOMBERG