Signaling she's in no hurry to raise rates, Federal ReserveChair Janet Yellen said the central bank is unlikely to move beforethe end of April and that borrowing costs will remain low for a“long time” after liftoff.

Yellen spoke after the Federal Open Market Committee (FOMC)announced it will be “patient” on the timing of the first rateincrease since 2006, replacing a pledge to hold rates near zero fora “considerable time.”

“The statement that the committee can be patient should beinterpreted that it is unlikely to begin the normalization processfor at least the next couple of meetings,” which take place inJanuary and March, Yellen said.

The new guidance gives the Fed more flexibility to react toeconomic data as it moves toward an exit from the mostaccommodative policy in its 100-year history.

“The timing of the initial rise in the fed funds target as wellas the path for the target thereafter are contingent on economicconditions,” Yellen said. “Monetary policy will still be veryaccommodative for a long time” after rates rise.

Most officials still see the first increase taking place nextyear, according to quarterly forecasts released today. At the sametime, the forecasts show central bankers expect rates to rise moreslowly over the next three years than previously anticipated, evenas the jobless rate falls in 2015 to the level they consider fullemployment.

Stocks, Treasuries

Stocks extended gains and Treasury yields were higher after theFed's announcement. The Standard & Poor's 500 Index jumped 2percent, the most since 2013, to 2,012.89 as of 4 p.m. in New York.The 10-year Treasury note yielded 2.14 percent, a gain of eightbasis points.

The FOMC statement made no reference to the Russian currency crisis or other global risks that have roiledfinancial markets. Yellen said officials discussed Russia at thisweek's policy meeting and agreed it would have little impact on theU.S.

“U.S. banks' exposure to Russian residents is really quite smallin terms of relative to their capital,” Yellen said. “In terms ofthe portfolios of U.S. residents, there are Russian securities, butthey account for a very small share.”

Yellen said keeping borrowing costs low will help move inflationback up to the Fed's 2 percent goal. Consumer-price gains havelagged behind the goal for 30 straight months, and inflation isforecast to stay low next year before rising again toward thetarget in 2016.

She said the committee would like to see “a short period of aslight undershoot” of its maximum employment goal, so unemploymentgets low enough to drive up wages and prices.

“Historically, we have seen, as the economy strengthens andslack diminishes, that inflation does tend to gradually rise overtime,” Yellen said. “I will be looking for evidence that I thinkstrengthens my confidence in that view.”

In its statement, the Fed gave a rosier assessment of the jobmarket, while saying it “continues to monitor inflationdevelopments closely.”

The Fed's preferred inflation gauge, the personal consumptionexpenditures index, rose 1.4 percent in the year throughOctober.

Data released today confirm the trend. The consumer price index,a separate inflation measure, rose 1.3 percent from a year earlierin November, down from a 1.7 percent gain the month before.

At the same time, the labor market has improved faster than Fedofficials expected, bolstering the view of officials who say ratesshould rise sooner rather than later.

Payroll Gains

American employers added 321,000 workers to payrolls inNovember, bringing the total number of jobs gained this year to2.65 million, the most since 1999. The jobless rate remained at asix-year low of 5.8 percent, close to the Fed's goal for fullemployment.

The Fed's easy money policies have kept borrowing costs low,making it cheaper for consumers to buy homes, appliances, and cars,while fueling-stock market gains that have boosted householdwealth.

The S&P 500 Index is up 8.9 percent this year, even asconcerns about global growth and oil prices have trimmed itsgains.

The Fed cut its benchmark rate for overnight loans among banksto zero in December 2008 to battle the financial crisis whileembarking on three rounds of large-scale asset purchases aimed atsuppressing longer-term rates and stimulating growth.

Another easing tool has been forward guidance to manageexpectations for the future path of rates. Since September 2012,the Fed has assured investors that policy would remain easy for a“considerable time.”

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