After not raising interest rates in September, Janet Yellen, the chair of the US Federal Reserve, gave her strongest hint yet that the central bank may be preparing to raise interest rates in December.

In her testimony last night Yellen said that an improving economy has set the stage for a December rate rise. She did caveat these comments however by stating that economic reports need to continue to assure policy makers that inflation will accelerate moving forward. Inflation has been below the 2% target level for more than three years now.

The market is now pricing in a 56% chance that rates will increase at the December meeting.

The comments made by Yellen were not taken well by US markets in terms of price action. The S&P 500 and Dow Jones ended the day lower, whilst yields rose across the yield curve, although more so those with a shorter maturity (less than five years) compared to those of longer maturity.