Some people believe that there is nothing worse than not knowing what's going on. But when you're talking central banking there is something much worse, you might even say doubly worse--a stubborn leader who doesn't know what's going on.
Federal Reserve Chair Janet Yellen returned to Congress on Thursday and again stressed that the U.S. central bank was not on a "pre-set" path to return policy to "normal" given a worsening meltdown in global stock markets.
But, testifying for a second day before U.S. lawmakers, Yellen said she still expects the Fed will gradually raise interest rates this year, given a strong U.S. labor market and steady economic growth.
With investors stampeding to safer assets globally, the head of the world's most influential central bank acknowledged that a weakened global economy and a steep slide in stock markets was tightening financial conditions faster than the Fed wants.
As she did at a House of Representatives panel on Wednesday, Yellen on Thursday warned the Senate Banking Committee against jumping to conclusions about the extent of the overseas threat to the growing U.S. economy.
"We are watching developments very carefully," Yellen told the panel of senators. "I would say there is always some chance of a recession in any year. But the evidence suggests that expansions don't die of old age."
But the Fed chief faced a different financial landscape than just a day earlier.
Prices of safe-haven U.S. Treasuries soared, with the yield on the benchmark 10-year bond falling to its lowest level in more than three years, while stocks plunged in Asia, Europe and the United States.
The MSCI all-country world equity index closed more than 20 percent below its record high last May, confirming global stocks are in a bear market.
reuters.com/article/us-usa-fed
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