Monday 24 October 2016

Yellen keeps rate hike in focus but warns of global slowdown

Howard Schneider and Lindsay Dunsmuir

Published 11/02/2016 | 02:30

Federal Reserve Chair Janet Yellen
Federal Reserve Chair Janet Yellen

Risks to the global economy are growing and could become self-sustaining, the head of the US central bank has warned.

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Fears over China's slowdown and plunging oil and stock markets could become self re-enforcing, posing a risk to growth, Federal Reserve Chair Janet Yellen said yesterday.

"These developments if they prove persistent, could weigh on the outlook for economic activity and the labour market," Ms Yellen said in remarks prepared for her semi-annual appearance before the House Committee on Financial Services.

Her commentary combined a steady-as-she-goes account of Fed policy with an acknowledgement of intensifying risks.

There are good reasons to believe the United States will stay on a path of moderate growth that will allow the Fed to pursue "gradual" adjustments to monetary policy - meaning interest rate rises, she said.

Investors have all but ruled out a rate hike for the rest of the year, but the comments keep that option open. US stock markets opened higher and the dollar crept up as well after the comments.

The Fed in December raised interest rates for the first time since the financial crisis and signalled further rises for 2016. (Reuters)

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