Federal Reserve Chair Janet Yellen said Friday that the case for raising interest rates has strengthened in light of a solid job market and an improved outlook for the US economy and inflation.

At a gathering of central bankers from round the world in Jackson Hole, Wyoming, Yellen said improvements in the USA labor market and expectations for moderate economic growth have boosted the case for a rate rise, supporting what the rate futures market has been pricing in for some time. The gains were all but erased after Fed Vice Chairman Stanley Fischer said her remarks leave open the possibility of boosting rates in September.

The economy is "nearing" the Fed's goals of full employment and stable prices, share said.

With an interest rate hike unlikely in the immediate future, the dollar is struggling to gain traction.

Still Yellen declined to hint at whether the Fed might raise rates at its next policy meeting, September 20-21, or at its subsequent meetings in early November and mid-December.

The head of America's central bank said the case for an interest rate hike had strengthened but stopped short of indicating any timetable for a move.

"Yellen's speech at Jackson Hole today didn't necessarily offer much in the way of surprises", said OANDA senior market analyst Craig Erlam.

"New policy tools, which helped the Federal Reserve respond to the financial crisis and Great Recession, are likely to remain useful in dealing with future downturns", Yellen said. Although setting a hawkish tone and perhaps trying to sound balanced, Yellen did issue a few cautionary words, but for the most part, she indicated that more rate hikes were on the horizon.

Although US government data earlier on Friday showed the economy growing only sluggishly in the second quarter, Yellen said a lot of new jobs were being created and economic growth would likely continue at a moderate pace.

Yellen's words returned a measure of clarity on the intentions of U.S. monetary policymakers, who have been publicly at odds in recent months over the need to raise rates in the near-term. "On balance, it strengthened the case for a December move", said Bill Northey, chief investment officer for the private client group at U.S. Bank in Helena, Montana.

Prices for fed funds futures implied investors saw about even odds that the Fed will raise rates in December, largely unchanged from before Yellen's remarks.

The dollar eased to 100.47 yen from 100.55 yen Thursday in NY, while the euro nudged up to US$1.1291 from US$1.1281.

In a meeting, members of the groups Fed Up and the Center for Popular Democracy told Fed policymakers that the assessment that the USA was approaching full employment did not reflect life for many blacks and Latinos looking for work. The dollar's 5 percent loss this year reflects a dimming outlook for the US central bank to reduce stimulus and diverge from unprecedented easing in Europe and Asia.

In afternoon trading, the dollar index, which measures the greenback versus six major currencies, rose 0.8 percent at 95.563.

By Adam Cater

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