Washington (AFP) – Federal Reserve Chair Janet Yellen warned Tuesday that the US economy faces “considerable uncertainty” from slower domestic activity and from a possible British vote to break with the European Union.
Pointing to dragging hiring and business investment recently, and to the risk that a pro-Brexit vote will send shock waves through global markets, Yellen signaled that the Fed has become less optimistic about US growth over the short term and will proceed with great caution on plans to raise interest rates.
She said in testimony to the Senate Banking Committee that US growth has picked up noticeably in the second quarter from the sluggish pace at the beginning of the year. Nevertheless, she said economic growth has been uneven and clear downside risks remain a threat.
“Considerable uncertainty about the economic outlook remains,” she said. “The latest readings on the labor market and the weak pace of investment illustrate one downside risk — that domestic demand might falter.”
Added to that, Yellen said, are the challenges of slower growth and reform hurdles in China, and the referendum in Britain on Thursday on pulling out of the European Union, which could radically alter Europe’s economic framework.