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Yellen: Slower Rate Hikes If Economy Disappoints

Federal Reserve Chair Janet Yellen said the U.S. economy faces a number of global threats that could hamper growth and compel the Fed to slow the pace of future interest rate hikes.

She highlighted in her semiannual report to Congress the widening fallout from concerns over China’s weaker currency and economic outlook, which is rattling financial markets around the world.

While the Fed expects to raise interest rates gradually, they are not on any preset course, she said Wednesday. The Fed would likely move slower “if the economy were to disappoint.”

In her first public comments in two months, Yellen offered no major surprises. She reiterated the Fed’s confidence that the U.S. economy was on track for stronger growth and a rebound in inflation. At the same time, she acknowledged the weaker economic data reported since the start of the year and made it clear the Fed is closely monitoring greater risks from abroad.

Yellen did mention in her prepared comments to the House Financial Services Committee that it was possible that the recent economic weakness could prove temporary, setting the stage for faster economic growth and a stronger increase in inflation than expected. Should that occur, the Fed will be ready to hike rates more quickly than currently anticipated.

“The actual path of the (Fed’s key interest rate) will depend on what incoming data tell us about the economic outlook,” Yellen said.

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