Federal Reserve tells Congress further rate hikes are on way

WASHINGTON (AP) The Federal Reserve says it expects the U.S. economy will strengthen and warrant further gradual increases in its key interest rate.

That rate forecast was included in the Fed's semi-annual monetary report to Congress, which Chair Janet Yellen will deliver to Congress next week. The Fed has raised interest rates three times since December, pushing its benchmark rate to a range of 1 percent to 1.25 percent. The Fed noted that policymakers still expect one more rate hike this year and another three hikes in 2018.

The Fed says this projected pace of hikes would still allow the labor market to keep strengthening and inflation to climb to the Fed's 2 percent target. The Fed also signaled that it expects to begin reducing its massive bond holdings this year.