Fed could raise rates in December, Yellen says

The Federal Reserve may raise interest rates when it meets in December if the economic data supports taking that step, the head of the central bank said on Wednesday.

"Now no decision has been made on that and, what it will depend on, is the [Federal Open Market Committee's] assessment at the time. That assessment will be informed by all of the data that we collect between now and then," Janet Yellen said.

The Fed chief, who was testifying before the House Financial Services Committee, also said the economy was expected to grow sufficiently to continue generating job growth and return inflation to the central bank´s 2% target.

“If we were to move, say in December, it would be based on an expectation, which I believe is justified, that with an improving labor market and transitory factors fading that inflation will move up to 2 percent,” Yellen explained.

US gross domestic product expanded at an annualised clip of 1.5% over the three months to September but the median forecast from economists was calling for a reaceleration to grotwh of 2.7% in the final strecth of the year.

As of 16:04 the yield on the policy-sensitive two year Treasury note jumped four basis points to hit 0.81%, a seven-week high.

However, the yield on the benchmark 10-year Treasury edged higher by only one basis point to 2.23%, a seven-week high itself.

The Federal Open Market Committe´s last meeting was scheduled for 15-16 December, with a new set of macroeconomic forecasts from the Fed´s rate-setters also due to be revealed alongside Yellen´s post-meeting press conference.

Testifying on the state of the country´s banking system, Yellen said regional banks were well capitalised and had nearly doubled to approximately $500bn at the eight largest US banks.

However, the latter still had "subastantial" compliance and risk-management issues.

That is why the Fed had proposed that six of those eight institutions be required to raise an additional $120bn for their capital buffers.