Yellen, speaking at an global gathering of central bankers and academics in Jackson Hole, Wyoming, did not say when the USA central bank would raise borrowing costs, and investors remained skeptical that such a move was imminent.
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Data from the Commerce Department showed that USA economic activity grew slightly less than initially estimated in the second quarter.
Federal Reserve chairwoman Janet Yellen said that the argument for another rate hike “has strengthened in recent months” during her speech in Jackson Hole, Wyoming, which led to wild fluctuations in commodity and equity markets and a weakening of the dollar.
Yellen did not give guidance on what the central bank needs to see before raising rates.
Some economists have said they think conditions are ripe for the Fed to alert investors that it may be inclined to act at its next policy meeting, September 20-21. But she’s stopping short of signalling any timetable for the next move.
Many economists have already pencilled in a rate increase at the Fed’s December 13-14 meeting, which gives the FOMC more time to monitor the pace of economic improvement.
“Of course, our decisions always depend on the degree to which incoming data continues to confirm the Committee’s outlook”, she added.
Yellen said the economy was nearing the central bank’s goals of maximum employment and price stability, but maintained that future hikes should be “gradual”.
The Canadian dollar was at 77.41 cents U.S., up 0.05 of a cent from Thursday’s close.
The dollar jumped after Yellen’s remarks and was about 0.50 percent higher against a basket of currencies in early afternoon trading. According to Lipper, U.S. stock funds endured $6.4 billion in outflows during the week.
Yellen has been adamant that the Fed should raise rates at least twice this year and begin the extended process of normalising rates after beginning the move in December 2015.
The broader Topix index of all first-sections shares shed 1.26 percent, or 16.37 points, to end at 1,287.90.
Yellen was speaking at a Fed conference where central bankers gathered to hear new ideas on how to stimulate economies even after officials have cut rates to near zero and flooded banks with money.
Instead she argued that the main tools in the Fed’s box – bond-buying and statements about the likely path of rates, known as forward guidance – remain adequate.
Kansas City Fed President Esther George said Thursday that labor-market gains and rising inflation warrant higher interest rates.
The group, wearing T-shirts bearing the slogan, “We Need a People’s Fed”, posed questions about economic policy and the need for diversity to the Fed officials who took part in the hour-long discussion.
Fed leaders have at times used the Jackson Hole event to announce major policy shifts.
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“If you commit to aiming for a higher inflation rate than 2% – I would think temporarily would be a reasonable thing to do – then in that case, you’re also committing, you’re also indicating that you’re not going to react as quickly to data coming in as strong”, Mishkin responded.
