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Federal Reserve Chair Janet Yellen said Wednesday that US economic activity remains solid and that the Fed could decide to increase interest rates at its December meeting.

“At this point I see the US economy as performing well,” she told a congressional panel.

Domestic spending is growing “at a solid pace” and the Fed expects the economy will continue to grow fast enough to boost the labor market and begin pushing inflation toward the Fed’s 2.0 percent target, she said.

Given those conditions, she reiterated the position taken by the policy-making Federal Open Market Committee at its meeting at the end of October.

“Our statement indicates that December would be a live possibility” for an increase in the federal funds rate, she said.

However, she stressed, it also depends on what data says about the US economic outlook when the FOMC meets on December 15-16.

Markets and economic policymakers worldwide have been fixated for months on when the Fed will undertake the first increase in the fed funds rate in more than nine years.

The rate has been locked extraordinarily near zero since 2008 to foster economic growth.

But even as the US has slowly recovered from the Great Recession, slower global growth has kept the first increase on hold as the Fed weighs ongoing risks to the US economy.

Yellen downplayed the importance of the first increase, expected to be a mere 0.25 percentage point, and stressed that it will mark the start of a slow series of increases.

“Markets and the public should be thinking of the entire path of policy rates over time,” she said.

“That will be a very gradual path,” and depends on the path of the economy, she said.

Meanwhile, the US trade deficit narrowed sharply in September following a surge in August, hitting a seven-month low as exports rebounded and imports fell, official data released Wednesday showed.

The Commerce Department reported the trade gap fell to $40.8 billion in September from a revised $48.0 billion in August, previously estimated at $48.3 billion.

The September deficit was smaller than the consensus estimate of $43.0 billion, and was the lowest since February.

“We view the sharp September narrowing in the trade deficit largely as payback from the rapid widening seen in August,” said Barclays Research analyst Jesse Hurwitz.

Exports rebounded from an August slump, increasing 1.6 percent in September to $187.9 billion. The jump came mainly from consumer goods and capital goods.

“The outlook for exports remains very cloudy… given the strength of the dollar and slower overseas growth,” cautioned Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Imports fell 1.8 percent to $228.7 billion, exclusively due to a drop in imports of goods such as industrial supplies, capital goods and automotive vehicles and parts.

Briefing.com analysts said the drop in imports was “surprisingly broad-based given the dollar’s strength and didn’t exactly connote an element of strong demand in the US.”

The trade report reflected a cooling US economy that saw growth at an annual rate of 1.5 percent in the July-September period after a robust 3.9 percent pace in the second quarter.

The three-month moving average of the trade deficit shrank $1.5 billion to $43.5 billion in September. Still, the trade gap was up 3.9 percent in the first nine months of the year, compared with the same period in 2014.

The decline in global oil prices and the boom in US shale production continued to reduce the trade gap in petroleum products, which fell to $5.6 billion in September from $6.9 billion the prior month.

Unadjusted goods trade data showed the politically sensitive trade gap with China widened almost four percent to $36.3 billion as imports soared to $45.7 billion. In the year to date, the gap has reached $273.6 billion.

The US government has long complained that the Chinese government keeps its yuan currency undervalued to gain an unfair advantage for its exports.

The deficit with the 28-nation European Union shrank a hefty 14.5 percent to $11.8 billion.

The gap with Canada, the largest US trade partner, widened by about 11 percent to $2.0 billion.

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