Fed's Yellen reiterates rate hike likely this year

The outlook for the U.S. economy and the labor market is favorable enough for the Federal Reserve to remain on course for the first interest-rate hike in nearly a decade later this year, Fed Chair Janet Yellen said Wednesday.

"Economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target, Yellen said in prepared remarks before the House Financial Services Committee, the first of two days of testimony before Congress.

Much like a speech delivered by Yellen five days ago, she on Wednesday reiterated the timing of the Fed's initial move is not as important as the overall course of hikes, which will she said would come gradually. Projections by the central bank are "not statements of intent to raise rates at any particular time," she said.

Developments overseas pose particular risks to U.S. economic growth, Yellen said. "Although the recovery in the euro appears to have gained a firmer footing, the situation in Greece remains difficult. And China continues to grapple with the challenges posed by high debt, weak property markets, and volatile financial conditions."

Paul Ashworth, chief U.S. economist with Capital Economics, thinks that how the economy fares over the second half of the year will determine how quickly the central bank ratchets up interest rates.

"Regardless of Yellen's current take on economic conditions, what will determine the timing of the first rate hike and the pace of tightening after that is economic conditions, particularly the pace of wage growth and core inflation," he said in a note.

Yellen's written statement to the panel included a definitive defense of the Fed's "transparency and accountability," detailing the Fed's release of information to financial markets and audit schedules as reasons the central bank does not require more congressional oversight.

Yellen and the Fed drew harsh criticism from the Texas Republican Jeb Hensarling, chair of the House committee, for the Fed's handling of an internal probe into the leak of monetary-policy information in 2012. When asked by Hensarling if she would appear before the committee as it investigates the leak, Yellen said she was ready to "respond to requests of this committee."

Yellen has said that the Fed has not handed over all of the material requested by Congress because of an ongoing investigation by the Justice Department.