The Dow Jones Industrial Average reached a record high on Wednesday, as stocks kept their upward momentum following Federal Reserve Chair Janet Yellen’s congressional testimony indicating the Fed will gradually raise interest rates.

Yellen’s speech was a nod to Wall Street as the Fed signaled it will gradually tighten policy and gradually unwind its massive balance sheet. A neutral interest rate level refers to one that neither encourages nor discourages economic activity. Wall Street cheered Yellen’s dovish tone, alleviating some concerns over the recent dip in inflation.

The rate-sensitive S&P 500 real estate index was among the strongest in the benchmark index, posting a 1.3 percent gain, its largest one-day percentage gain in about four months. Technology shares also rose sharply, with the tech index up 1.3 percent.

The dovish sentiment from the Fed at the same time put the S&P 500 financials, which tend to benefit from higher rates, last among sectors, ending with just a gain of 0.1 percent.

An index of airline stocks was up 2.3 percent after American reported quarterly numbers that exceeded expectations. American ended the day up 4.2 percent. Delta, United Continental, Alaska Air, Spirit and JetBlue all gained at least 1 percent each.

Delta Air Lines is due to report Thursday. On Friday, reports from three of the largest banks, JPMorgan Chase, Wells Fargo and Citigroup are expected.

Stocks held their gains after the Fed’s latest Beige Book report showed that the economy grew at a “slight to moderate” pace over the last several weeks across all regions.

Approximately 6.1 billion shares changed hands on the major domestic equity exchanges, slightly below the 6.9 billion share daily average for the past 20 trading days, according to Thomson Reuters data.

Interest Rate Increases Are Coming

In her testimony to Congress on Wednesday, Fed Chair Janet Yellen indicated that the Fed is of the opinion that the economy is healthy enough for the Fed to raise rates and begin winding down its massive bond portfolio, though low inflation and a low neutral rate may leave the central bank with diminished leeway.

In what may be one of her last appearances before Congress, Yellen depicted an economy that, while growing slowly, continued to add jobs, benefited from steady household consumption and a recent jump in business investment, and was now being supported by stronger economic conditions abroad.

The Fed “continues to expect that the evolution of the economy will warrant gradual increases in the federal funds rate over time,” Yellen said in her prepared testimony. Reductions in the Fed’s portfolio of more than $4 trillion in securities are likely to begin “this year,” she said.

However, she also noted that given current estimates, the federal funds rate “would not have to rise all that much further” to reach a neutral level that neither encourages nor discourages economic activity.

The Fed still feels the economy needs loose, or accommodative, monetary policy, so a lower neutral rate means the Fed may feel compelled to slow the pace of rate hikes down the road.

Yellen told members of the House Committee on Financial Services, the economy remains strong enough for the Fed to continue to gradually tighten policy. In response to questions from lawmakers, she said she expects the gradual run down of the balance sheet will “play out smoothly” in markets.

The reduction in the balance sheet, which will begin slowly as the Fed reinvests only a portion of the holdings that mature each month, will mark the final exit from crisis-related policies.

Yellen’s past appearances before the House panel have sometimes involved sharp exchanges with lawmakers who think the Fed’s influence over the economy has grown too strong. Such lawmakers want policymakers to be guided more closely by a mathematical rule for setting interest rates.

This session was a more sedate meeting, with Committee Chair Jeb Hensarling, an advocate “rules-based” monetary policy, complimenting the Fed for including comparisons of its monetary policy with some of the more common formulas.

Tomorrow Yellen testifies before a House Financial Services Committee hearing covering monetary policy.  Her appearance, coming as the Trump administration mulls whether to replace her when her term ends in February, broke little new ground in terms of policy or regulatory changes.

“We have a relatively light regulatory agenda at this point,” Yellen said. She confirmed the Fed was reviewing some of the requirements imposed on bank boards of directors following the financial crisis, with any eye toward possibly easing some of them.

She also repeated the Fed’s strong opposition to proposals that policymakers worry could give elected officials influence over what are supposed to be independent Fed interest rate decisions.

A recent dip in inflation has been of concern among Fed officials who want to see surer progress toward the central bank’s 2 percent inflation goal. Yellen, however, ascribed it to “a few unusual reductions in certain categories of prices” that would eventually drop out of the calculation.

Otherwise, Yellen said, the economy appeared to be in a virtuous loop of hiring, spending and investment that “should increase resource utilization somewhat further, thereby fostering a stronger pace of wage and price increases.”

Fed’s Beige Book Report

The economy grew at a “slight to moderate” pace over the last several weeks across all regions of the country, with wage pressures reported for both low- and high-skilled jobs, the Federal Reserve reported in its latest compendium of regional economic activity.

“Activity expanded across all 12 Federal Reserve Districts in June, with the pace of growth ranging from slight to moderate,” the Fed said in its latest Beige Book report, a collection of snapshot reports from the Fed’s 12 regional reserve banks.

“Employment…maintained a modest to moderate pace of expansion,” the report found. “Wages continued to grow at a modest to moderate pace in most Districts…Rising wage pressures were noted among both low- and high-skilled positions.”

Household spending also held up in most regions, though auto sales declined in half of the Fed’s regions and a few districts saw a broader slowing.

“Apparel sales ‘continued to be hammered'” the Federal Reserve Bank of Philadelphia reported, with traditional stores and malls “buffeted by a surge in retail bankruptcies.” Wage pressures in the region “continue to be muted.”

The report is consistent with recent Fed policy statements and the testimony on Capitol Hill on Wednesday by Fed Chair Janet Yellen, who told Congress the central bank remained on track to continue raising rates and to soon start reducing the size of its asset holdings.

Growth overall is slow but steady; unemployment is low, but wages have yet to accelerate. Businesses consulted by the Fed reported a combination of labor shortages in some regions, with building contractors in Cleveland reporting trouble hiring enough drywall installers, and freight haulers struggling to find drivers despite higher wages.

Elsewhere, the Boston Fed reported a data storage firm was planning “double-digit percent increases in its net headcount,” with other tech-related firms also hiring, even as some mentioned the need to raise salaries to do so.

The Fed has been hoping that wage increases would accelerate as the unemployment rate drops, helping over time to push prices higher as well and reach the Fed’s two percent inflation target.

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