Fed on track to hike rates: Yellen

Federal Reserve Chair Janet Yellen was clearer than ever on Friday that the central bank was poised to raise interest rates this year, as the US economy was set to bounce back from an early-year slump and as headwinds at home and abroad waned.

Yellen spoke amid growing concern at the Fed about volatility in financial markets once it begins to raise rates, and a desire to begin coaxing skeptical investors towards accepting the inevitable: that a 6-1/2-year stretch of near-zero interest rates would soon end.

In a speech to a business group in Providence, Rhode Island, Yellen said she expected the world's largest economy to strengthen after a slowdown due to "transitory factors" in recent months, and noted that some of the weakness might be due to "statistical noise."

The confident tone suggested the Fed wants to set the stage as early as possible for its first rate rise in nearly a decade, with Yellen stressing that monetary policy must get out ahead of an economy whose future looks bright.

While cautioning that such forecasting is always highly uncertain, and citing room for improvement in the labour market, the Fed chief said delaying a policy tightening until employment and inflation hit the central bank's targets risked overheating the economy.