The head of the US Federal Reserve said has said that a rate rise would probably be appropriate in "coming months" if the US economy continued to improve. It is the strongest signal yet that the US central bank could tighten monetary policy in the summer.

Speaking at Harvard University yesterday, Janet Yellen, the Fed chair, became the latest policymaker to point to improving economic conditions in the US as laying the case for a potential rate rise.

Growth had been soft in the first quarter, with new data released yesterday pointing to an annualised rate of growth of just 0.8 per cent. But Ms Yellen said there were signs that “the economy is continuing to improve”.

The sum of the economic data, she said, meant it was appropriate to “gradually and cautiously” raise interest rates and “probably in the coming months such a move would be appropriate”.

Ms Yellen did express continuing anxiety about the slow pace of the US recovery, pointing to slow productivity growth in recent years as a “serious and negative development”. New data this week pointed to US productivity shrinking for the first time in three decades.

Ms Yellen was speaking publicly for the first time since March 29th. Fed policymakers have since argued that the case has grown stronger for an June increase in interest rates by a quarter-point. That has caused markets to bring forward their expectations for a June increase.

– (Financial Times)