As part of their dual mandate, Fed policy makers are keeping a close watch on inflation trends. The personal consumption expenditures index, the Fed’s preferred inflation gauge, rose 0.2 percent in May from a year earlier and has been below the Fed’s 2 percent goal since May 2012.
Yellen expects “that it will be appropriate at some later this year to take the first step to raise the federal funds rate and thus begin normalizing monetary policy,” she said in a speech last week in Cleveland. She also added a note of caution, saying that “the course of the economy and inflation remains highly uncertain, and unanticipated developments could delay or accelerate this first step.”
Yellen on Wednesday begins her semi-annual monetary policy testimony to lawmakers, who may pepper with questions about the economic and monetary policy outlook.