Fewer rate hikes could be a possibility, giving consumers who are saddled with large amounts of debt a slight reprieve, based on Federal Reserve Chair Janet Yellen's Congressional testimony Wednesday morning.
Before a House panel, Yellen said the economic recovery would continue for at least a couple of years since the actions of the central bank were "positioned to foster further economic growth," said Mark Hamrick, senior economic analyst and Washington bureau chief of Bankrate, the New York-based financial data company.
Yellen's comments echoed the Fed's earlier sentiments in the year that additional interest rate hikes will continue, including one that is likely to occur in 2017 and up to three during 2018 and 2019.
"Because the neutral rate is currently quite low by historical standards, the federal funds rate would not have to rise all that much further to get to a neutral policy stance," Yellen said today in her semi-annual monetary policy report.
A slowdown in the number of hikes is probable and opens the door that "fewer rate hikes could be in store in the intermediate term," he said.
Hamrick cautioned that these are current projections, "not commitments or promises."
"If the economy were to either ramp up or slow down, then the projections for further rate hikes change, perhaps even dramatically," he said.
Consumers who currently have variable rate loans or credit cards should make paying down their debt a priority, said Hamrick. As interest rates climb, borrowers face higher monthly payments and the potential for longer repayment periods.
If interest rates increase higher than what is expected, it could also lead to additional volatility in the stock market, which has been "on a red-hot run for some time now," he said.
Yellen mentioned that some questions about the economy remain such as "changes in fiscal and other government policies," alluding to future decisions that the president and Congress could make. Some of the potential legislation includes spending on infrastructure and reform on taxes.
One area she refrained from commenting on was the future leadership of the Fed since her term ends on February 3, 2018. Yellen did not discuss whether she would want to accept a second term if the White House offered it. Reports have stated that the administration may not chose her to lead the Fed again.
"With the president and Republicans inclined to reduce regulation and oversight, the Fed has to be somewhat concerned that the unintended consequences of such moves could be to ignite a financial crisis," Hamrick said.
Details were not provided on the Fed's plans to lower the $4.5 trillion dollar balance sheet this year, which occurred during the financial crisis.
The markets responded favorably to Yellen's comments today.
"Clearly, the equity market liked much of what she had to say as the market rallied in reaction to her prepared speech," said J.J. Kinahan, chief market strategist for TD Ameritrade, an Omaha, Neb.-based online broker. "Her speech did contain some troubling parts when she talked about technology and globalization eliminating the middle class. The bond market had a positive reaction once again, lowering yields."