Yellen says rate hike possible in December

WASHINGTON — Federal Reserve Chairwoman Janet Yellen said in congressional testimony Wednesday that an interest rate increase in December would be a “live possibility” if the economy stays on track.

At its Dec. 15-16 meeting, the Fed will consider raising a key interest rate from a record low near zero if the economy continues to grow at a strong enough pace to keep adding jobs and push annual inflation toward the Fed’s 2 percent target, Yellen said.

While Yellen acknowledged progress in making the financial system more resilient to shocks, she expressed concerns about the “substantial compliance and risk-management issues” at the institutions.

“Compliance breakdowns in recent years have undermined confidence in the (banks’) risk management and controls and could have implications for financial stability, given the firms’ size, complexity and interconnectedness,” Yellen said.

Committee Chairman Jeb Hensarling, R-Texas, criticized the Fed for failing to provide enough details about the annual stress tests it conducts on the biggest banks to ensure they can withstand a severe financial downturn.