Federal Reserve Chair Janet Yellen testified yesterday on "The Economic Outlook" before the Joint Economic Committee of Congress, and indicated that a rate hike was likely in December. She said, "​The stance of monetary policy has supported improvement in the labor market this year, along with a return of inflation toward the FOMC'​s 2 percent objective. In September, the Committee decided to maintain the target range for the federal funds rate at 1/​4 to 1/​2 percent and stated that, while the case for an increase in the target range had strengthened, it would, for the time being, wait for further evidence of continued progress toward its objectives. At our meeting earlier this month, the Committee judged that the case for an increase in the target range had continued to strengthen and that such an increase could well become appropriate relatively soon if incoming data provide some further evidence of continued progress toward the Committee'​s objectives. This judgment recognized that progress in the labor market has continued and that economic activity has picked up from the modest pace seen in the first half of this year. And inflation, while still below the Committee'​s 2 percent objective, has increased somewhat since earlier this year. Furthermore, the Committee judged that near-​term risks to the outlook were roughly balanced. Waiting for further evidence does not reflect a lack of confidence in the economy. Rather, with the unemployment rate remaining steady this year despite above-​trend job gains, and with inflation continuing to run below its target, the Committee judged that there was somewhat more room for the labor market to improve on a sustainable basis than the Committee had anticipated at the beginning of the year. Nonetheless, the Committee must remain forward looking in setting monetary policy. Were the FOMC to delay increases in the federal funds rate for too long, it could end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of the Committee'​s longer-​run policy goals. Moreover, holding the federal funds rate at its current level for too long could also encourage excessive risk-​taking and ultimately undermine financial stability.... Of course, the economic outlook is inherently uncertain, and, as always, the appropriate path for the federal funds rate will change in response to changes to the outlook and associated risks."

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