The case for raising the short-term interest rate "has strengthened in recent months," said Federal Reserve Chair Janet Yellen at Friday's much-anticipated Kansas City Fed economic symposium in Jackson Hole, Wyoming.
Following the news, the Dow Jones industrial average jumped by 102 points, the S&P 500 gained 14 points, and the Nasdaq rose to 5,251.
The Federal Open Market Committee "continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near our statutory objectives," Yellen said.
The Fed Chair stopped short of confirming that a September rate hike is off the table.
"In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months," she wrote in prepared remarks.
Though Wall Street has mainly caught its breath after the whirlwind of Brexit, markets remain cautious amid the ongoing U.S. Presidential election and had been eagerly awaiting a sign on the crucial issue of a rate hike, placing the chance at 55 percent by December, according to CME Group's FedWatch.
New York Fed President William Dudley signaled last week that it would be "appropriate" for the Fed to hike rates as soon as September; and on Friday morning, Atlanta Fed President Dennis Lockhart told Bloomberg TV, "I can see two rate hikes as possible when I look at the calendar. We have three more (policy-making) meetings this year, so that's possible."
Yellen's widely anticipated speech came at the end of a particularly slow month that saw strong job growth — but stagnant wages.
"While economic growth has not been rapid, it has been sufficient to generate further improvement in the labor market," said Yellen.
Since 2008 the Fed kept rates close to zero, but pushed them up by 0.25 percent in December 2015.