March US interest rate hike likely appropriate, Fed's Yellen says

The head of the US central bank flagged an interest rate hike was likely in the pipeline when monetary policymakers next met to decide on policy, on 14 and 15 March.

A hike in March would "likely be appropriate" if incoming economic data evolved as expected, Janet Yellen said.

She also estimated that the 'neutral' interest rate setting (in inflation-adjusted terms) in the States is now "close to zero", whereas at the time of her speech it was "near -1.0%".

Taken at face value and assuming that inflation held at current levels, that implied another 100 basis points of interest rate increases would be necessary.

Yellen added: "I currently see no evidence that the Federal Reserve has fallen behind the curve, and I therefore continue to have confidence in our judgment that a gradual removal of accommodation is likely to be appropriate.

"However, as I have noted unless unanticipated developments adversely affect the economic outlook, the process of scaling back accommodation likely will not be as slow as it was during the past couple of years."

"At this point, Dr. Yellen says she believes the Fed is not behind the curve, but when did you last hear a Fed Chair say the opposite? Watch the labor data after the March hike, because that's what the Fed will be doing. We expect further hikes in June, September anbd December," Ian Shepherdson, chief economist at Pantheon Macroeconomics said.

As of 1824 GMT, the yield on the benchmark 10-year US Treasury was higher by three basis points to 2.51%.