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Yellen Considers Higher Interest Rate

Federal Reserve Chair Janet Yellen at the Economics Club of Washington, Dec. 2, 2015.

The head of the U.S. central bank says she expects the U.S. job market to continue improving, and the rate of inflation to rise closer to the Federal Reserve's two percent target rate.

Many economists interpret that as a signal that Fed officials will raise the key interest rate on December 16, a change that has been under consideration for a long time.

In a speech to the Economic Club of Washington on Wednesday, Fed Chair Janet Yellen said she expects the economic drag from the strong U.S. dollar and faltering foreign markets to diminish over time. She cautioned that bad economic reports could still delay a rate increase. The next major economic report comes Friday, and it is expected to show the unemployment rate at a relatively low five percent, with a net gain of 190,000 jobs nationwide.

The Federal Reserve cut a key interest rate to a record-low near zero during the financial crisis. The idea was to make it cheaper for business to borrow the money needed for new equipment, create jobs, and cut unemployment. Since the stimulus effort, unemployment has fallen from 10 percent to five percent, and a new report from Georgetown University says under-employment has also been cut sharply, particularly for people with college degrees.

Some economic studies published Wednesday may increase the likelihood of a rate hike. ADP, a company that processes 24 million paychecks for companies across the United States, says employment rose by 217,000 in November. A separate Gallup survey of U.S. workers shows the number saying their companies are hiring is far higher than the number worrying about layoffs.

CoreLogic, which tracks the housing industry, says its newest analysis shows a decline in the portion of home sales due to foreclosure or other kinds of distress. Foreclosures and other problems soared during the financial crisis, so a decline in "distressed" sales shows an improving housing sector.

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