Top Federal Reserve officials gave the public notice Friday that they could raise rates as soon as the next monetary policy meeting in September, sooner than investors have thought.
"I believe the case for an increase in the [Fed's interest rate target] has strengthened in recent months," Yellen said in a text prepared for a speech released by the Fed Friday morning.
Yellen didn't otherwise provide direct guidance about the timing of such an interest rate hike or the Fed's other plans, other than to say that the U.S. economy is nearing the Fed's goals for maximum employment and for 2 percent inflation.
But her speech clearly indicated that a rate hike, from the 0.25 percent to 0.5 percent range the Fed has targeted since December, could be in the cards as soon as September, and that the Fed is looking to tighten money earlier and more than investors are thinking right now. That move, aimed at preventing the economy from overheating and generating too-high inflation, will affect interest rates throughout the economy, including corporate bonds, mortgages, credit cards, and more.
Fed vice chairman Stanley Fischer said in an appearance on CNBC later in the morning that Yellen's address was "consistent with answering 'yes'" to the major questions on investors' minds, namely whether the Fed might hike in September and whether they might raise rates more than once this year.
Fischer also clarified, however, that "it depends on what data we're going to get and how strong it is, because the picture is a very complex one."
Yellen's speech "leaves the door open for a rate hike at the 20-21 September ... meeting," wrote Nordea Markets analyst Jonny Bo Jakobsen, "but as usual Yellen gave no clear guidance on the exact timing of the Fed's next move, saying that the central bank's decisions always are data-dependent."
Bond market implied odds for the Fed raising rates in September didn't change significantly Friday morning.
Yellen's speech, her first public comments since congressional testimony in June, were prepared for delivery a monetary policy conference hosted by the Federal Reserve Bank of Kansas City in Jackson Hole, Wyo. The annual meeting has become an important event for the central bank to communicate its plans for the money supply and discuss new possibilities.
Before Yellen spoke, other members of the Fed gathered for the conference weighed in with their views of the most talked-about question facing the Fed, namely whether it will resume raising interest rates this year.
Dennis Lockhard, head of the Atlanta regional Fed bank, told Bloomberg TV that he "can see two rate hikes as possible when I look at the calendar."
Yellen's speech primarily concerned the tools the Fed has for controlling the money supply, and how the Fed might respond in the future to a recession if it has already lowere its interest rate target to zero.