20 Mar 2014

US rates may rise early 2015 - Yellen

3:02 pm on 20 March 2014

New United States Federal Reserve chief Janet Yellen has hinted that interest rates in the US could start to rise in early 2015.

Ms Yellen says the Fed could begin raising rates six months after it halts its monthly bond-buying programme.

Janet Yellen.

Janet Yellen. Photo: AFP

She made the remarks after the Fed said it would scale back bond purchases by a further $US10 billion per month.

Ms Yellen also said the Fed would no longer use the unemployment rate as its main yardstick for gauging the strength of the economy.

Speaking after chairing her first meeting of the Federal Reserve's open market committee, Ms Yellen said the Fed would use a wide range of measures to help it decide when to raise interest rates.

Nevertheless, she said dropping a promise to hold rates steady well past the time the US unemployment rate fell below 6.5 percent did not indicate any change in the Fed's policy intentions, the BBC reports.

This is the third time in a row that the central bank has tightened its stimulus efforts.

The latest reduction brings the Fed's monthly bond-buying down to $US 55bn from $US85bn last year.

"This is the kind of term it's hard to define," Ms Yellen said at the news conference. "Probably means something on the order of six months, or that type of thing."

If bond purchases end - as expected - later this year, this would imply rate increases around April 2015, says the BBC.

In its latest policy decision, the Fed said it would look at multiple factors before approving any rise in interest rates.

It had previously hinted at doing so once the jobless rate fell to 6.5 percent.

"This assessment will take into account a wide range of information, including measures of labour market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments," it said.