Federal Reserve

Janet Yellen: December rate hike a 'live possibility'

Janet Yellen: December rate hike a 'live possibility'
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Federal Reserve Chair Janet Yellen said Wednesday that December would be a "live possibility" for a rate hike if the upcoming data are supportive.

"Now no decision has been made on that and, what it will depend on, is the [Federal Open Market Committee's] assessment at the time. That assessment will be informed by all of the data that we collect between now and then," she said, testifying before the House Financial Services Committee.

Yellen also said she and the committee expect the economy to grow "at a pace that's sufficient to generate further improvement in the labor market, and to return inflation to our 2 percent target."

"If the incoming information supports that expectation, then or statement indicates that December would be a live possibility," she said.

According to the CME Group, the probability of a Fed rate hike next month increased to about 60 percent after Yellen's testimony.

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Yellen also provided testimony on the health of U.S. banks, which has improved, but some problems still remain.

Testifying before the House Financial Services Committee, Yellen said capital at the eight biggest U.S. banks has nearly doubled and now sits at about $500 billion.

Regional banks are also well capitalized while community bank loan growth has picked up, she said.

Nevertheless, the country's biggest banks still have substantial compliance and risk-management issues, which have undermined the confidence in them, she said.

This has led the Fed to propose a reform designed to reduce the possibility of big bank failures, as well as to limit the systemic damage done from such failures, Yellen said.

The central unveiled its proposal on Friday and said that six of eight key U.S. banks would need to raise an additional $120 billion to meet the proposed requirements.

"By making the failure of even the largest banks more manageable, the proposed regulation will be another important step in solving the too-big-to-fail problem," said Fed Gov. Daniel Tarullo in a statement Friday.

— CNBC's Elizabeth Schulze and Jacob Pramuk contributed to this report.