the u.s. dollar steamed to a level not seen since 2003 and yields on the 10-year treasury note reached a high for the year thursday, as federal reserve chairwoman janet yellen confirmed investors<u+2019> view that the u.s. economy is strong enough to withstand an interest-rate rise soon. ms. yellen told lawmakers in testimony thursday that the fed could move <u+201c>relatively soon,<u+201d> after the government released a grab bag of economic data all pointing to a stronger economy: an improving housing market, rising consumer prices and a more robust labor market. <u+201c>at this stage, i do think that the economy is making very good progress toward our goals, and that the judgment the [fed policy] committee reached in november still pertains,<u+201d> she told congress<u+2019>s joint economic committee. her comments bolstered expectations that the fed will lift its benchmark federal-funds rate at its next meeting on dec. 13-14. ms. yellen said the results of the u.s. presidential election hadn<u+2019>t altered the central bank<u+2019>s assessment, following its meeting earlier this month, that the case for a rate increase had grown. and thursday<u+2019>s data suggest president-elect donald trump is poised to take office in january at the helm of an economy that is gathering pace. u.s. consumer prices rose in october from a year earlier at the fastest rate in two years, while the number of americans filing new claims for unemployment insurance fell last week to its lowest level since 1973, the labor department reported thursday. housing starts were at their strongest pace since 2007, and permits for new construction rose in october. ms. yellen warned that holding off on a rate increase for too long could force the fed to raise rates relatively abruptly in the future to keep the economy from overheating. but she said the near-term risk of <u+201c>falling behind the curve<u+201d> soon is limited, and reiterated that the bank expects to raise rates gradually over the next few years. ms. yellen said it isn<u+2019>t clear whether mr. trump<u+2019>s proposals for tax cuts and increased spending, if enacted by congress, could alter that path in the future. since last week, investors have been pouring money into the dollar and financial shares, and pulling money out of government bonds, with many expecting mr. trump<u+2019>s election would mean a more expansive fiscal policy, stronger inflation and ultimately higher u.s. interest rates. the improving economic news and ms. yellen<u+2019>s comments solidified that view, investors said. the numbers <u+201c>were quite striking and suggest solid growth and inflation outlooks with very low recession fear,<u+201d> said mike lorizio, a senior fixed-income trader at manulife asset management. the ice dollar index, which measures the u.s. currency against six others, reached its highest level in more than 13 years on thursday and is up 2.9% since the election. the gap between u.s. and german government-bond yields yawned to its widest in 27 years. the dow industrials rose 36 points to 18904, their eighth rise in nine sessions, led by gains in financial stocks. the yield on the benchmark 10-year treasury note hit 2.278% thursday, the highest level in 2016. the u.s. yield premium over the 10-year german bund rose to 1.99 percentage points, the highest since may 1989, said steven zeng, interest-rate strategist at deutsche bank. expectations for an interest-rate increase in december have grown in recent sessions. fed funds futures, used by investors to bet on central-bank policy, showed a roughly 91% chance of a rate rise at the fed<u+2019>s meeting in december, according to cme group. fed officials said in their nov. 2 policy statement they only needed <u+201c>some<u+201d> further evidence of an improving economy before raising rates again. ms. yellen said data since the fed<u+2019>s most recent meeting affirms officials<u+2019> expectations for stronger economic growth, an improving job market and rising inflation. her remarks signaled they remain on track for raising their benchmark rate as soon as next month. <u+201c>yellen<u+2019>s prepared remarks followed by strong economic data for october<u+2026>all but guarantee a december funds rate hike,<u+201d> said pnc financial services group chief economist stuart hoffman. ms. yellen said it is too soon to know how the trump administration<u+2019>s economic policies will take shape, and what their potential effect could be on employment, growth and prices. but she said the fed will watch what congress does next year and update its economic outlook to take those changes into account. <u+201c>things could turn out very differently, we understand, and we will simply watch what decisions are made and factor them into our thinking going forward,<u+201d> she said. in considering the costs and benefits of fiscal policies, ms. yellen urged lawmakers to keep longer-term challenges in mind, including the country<u+2019>s rising ratio of debt to gross domestic product, and to remember that the economy might need stimulus measures if its runs into trouble. she also urged them to choose policies that would improve long-term productivity and economic growth. asked if the possibility of fiscal stimulus next year could warrant a delay in raising rates, possibly until january, ms. yellen said: <u+201c>i would think that the judgment the committee reached in november remains the appropriate one.<u+201d> the fed chief quashed speculation that she may leave the central bank soon after mr. trump takes office. earlier this year, he called ms. yellen <u+201c>highly political<u+201d> and accused her of keeping interest rates low to help democrats<u+2014>accusations she has denied. <u+201c>it is fully my intention to serve out that term,<u+201d> she said, when asked about the possibility that she might leave before her four-year term as chairwoman ends in february 2018. fed officials decided to hold off on raising rates at their meeting earlier this month after judging that there was <u+201c>somewhat more room<u+201d> for the labor market to improve than they had expected at the beginning of the year, ms. yellen said. the central bank still sees <u+201c>scope for some further improvement,<u+201d> she said. since their last meeting, fed officials have seen several other signs of economic progress: wages rose 2.8% in october, the fastest annual pace since june 2009, and employers continued to add jobs at a steady clip. americans boosted their spending at retail stores in october, and september sales were higher than previously estimated, marking the strongest two-month stretch of sales in at least two years. unemployment was at a low 4.9% last month. average monthly job growth so far this year is still well above estimates of the pace necessary to absorb new entrants into the labor force, ms. yellen said. the share of adults in the labor force<u+2014>those holding or actively seeking jobs<u+2014>has held steady this year, reflecting that the economy has had <u+201c>more room to run<u+201d> than officials had anticipated, she said. the decision to keep rates on hold this month did <u+201c>not reflect a lack of confidence in the economy,<u+201d> she said. fed officials have left the federal-funds rate unchanged this year after raising it in december 2015 to a range between 0.25% and 0.50%. <u+2014>eric morath and anna louie sussman contributed to this article. write to kate davidson at kate.davidson@wsj.com
fed rate rise could come <u+2018>relatively soon<u+2019> as data point to stronger economy  - wsj
kate davidson