News / USA

    Yellen: Global Problems May Slow US Economy

    Federal Reserve Board Chair Janet Yellen prepares to testify on Capitol Hill in Washington, Feb. 10, 2016, before the House Financial Services Committee hearing on monetary policy and the state of the economy.
    Federal Reserve Board Chair Janet Yellen prepares to testify on Capitol Hill in Washington, Feb. 10, 2016, before the House Financial Services Committee hearing on monetary policy and the state of the economy.
    Jim Randle

    The head of the U.S. central bank warned Wednesday that falling financial markets and global economic weakness could slow the pace of interest rate increases by the United States.

    Appearing on Capitol Hill before U.S. lawmakers, Federal Reserve Chair Janet Yellen spoke about the central bank's interest rate policy for the first time since December, when the Fed raised its rates for the first time in nearly a decade.

    She said the Fed remains confident that the U.S. economy is on track for stronger growth and a slight increase in inflation, which experts say has been too low in recent quarters.

    Though risks have intensified, Yellen added that it is unlikely the Fed would find it necessary to reverse its rate rise in December and cut rates once more. At the same, she acknowledged the weaker economic figures that have emerged this year have made the central bank's experts nervous.

    Yellen said uncertainty about China's currency policies and its economic prospects have contributed to "increased volatility in global markets."

    Key stock market indexes in Europe and the United States were mostly higher as investors assessed Yellen’s comments


    Hard times for commodities exporting countries

    Yellen says worries about growth and a glut of crude oil and other commodities on global markets contributed to the recent fall in oil prices. She says that could "trigger financial stresses" in the many nations that depend on commodity exports.  

    Slowing foreign economies, and the very strong U.S. dollar, also hurt demand for U.S. exports and crimp economic growth.
     
    The Fed chief said the U.S. economy has been “less supportive” of growth recently, but added these factors are likely to ease in the "medium term."
     
    She says the U.S. job market continues to improve and that the overall economy is expanding at a "moderate" pace.   

    Delay in rate increases likely

    Back in December, top officials of the Federal Reserve voted to increase the key U.S. interest rate from near zero to half of a percent.  Fed officials are working to raise rates from the emergency low levels imposed to bolster the economy during the recession to levels consistent with historic averages.  At that time, many analysts said the Fed would probably raise rates four times this year, but now most economists say the Fed is likely to delay any more rate increases, and might not make any this year.

    Low rates help boost economic growth, but if they are held too low too long, they might spark inflation that could damage the economy. 

     

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