The Federal Reserve will likely raise interest rates this year, as long as economic activity picks up, Federal Reserve Chairwoman Janet Yellen said Friday.
From there, the pace of future hikes will be gradual, she added.
In a speech to the Chamber of Commerce in Providence, R.I., Yellen said transitory factors were mostly to blame for first quarter weakness, and that the economy should improve throughout the year.
The labor market is now "approaching full strength," and unemployment should fall to near 5 percent by the end of the year, she predicts.
"Delaying action to tighten monetary policy until employment and inflation are already back to our objectives would risk overheating the economy," Yellen said.
"If conditions develop as my colleagues and I expect, then the FOMC's objectives of maximum employment and price stability would best be achieved by proceeding cautiously, which I expect would mean that it will be several years before the federal funds rate would be back to its normal, longer-run level."
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April 24, 2026 15:15 ET Economics news flow was relatively light this week even as the conflict in the Middle East continued, raising concerns for policymakers. In the U.S., spending data, initial jobless claims and pending home sales were the highlights. Business confidence in the biggest euro area economy was in focus in Europe. Inflation data from Japan gained attention in Asia.