Fed mulls interest rate hike 'this year': Yellen

The Federal Reserve is considering raising the United States' near-zero interest rates "this year" even though this may slow the economy, Fed Chair Janet Yellen said Friday.

"The committee is now giving serious consideration to beginning to reduce later this year some of the extraordinary monetary policy accommodation currently in place," Yellen said in a speech in San Francisco, according to the prepared text.

Earlier this month, the Federal Open Market Committee, the Fed's policy arm, opened the door to a federal funds rate hike as early as midyear.

But a string of weak economic data, particularly in consumer spending, housing and manufacturing, has muddied the outlook for an increase in rates pegged at the zero level for more than six years.

"With continued improvement in economic conditions, an increase in the target range for that rate may well be warranted later this year," Yellen said.

The Fed's ultra-low rate has supported a sizeable reduction in labor market slack over the past two years and appears to be leading to "further substantial gains," she said.

"A modest increase in the federal funds rate would be highly unlikely to halt this progress, although such an increase might slow its pace somewhat," the Fed chief acknowledged.