Here Are Yellen’s Greatest Economic Fears, Foreign and Domestic
Federal Reserve Chair Janet Yellen spoke Wednesday to Congress’ Joint Economic Committee on the economic condition of the United States, touching on issues within the nation as well as those outside that could still tug on the strings of the global and American economic health. There was a heavy emphasis in the session, from both her and the congressional panel gathered to question her, on predictive abilities of the Fed, especially concerned over inflation and labor markets. While overall Yellen had positive things to say about the direction of the U.S. recovery, she noted that there were a few issues that worried her going forward, specifically international issues and internal concerns regarding the housing market’s slump.
Looking global first, Yellen discussed international political strife as one risk factor to the global and American economies. “At present, one prominent risk is that adverse developments abroad, such as heightened geopolitical tensions or an intensification of financial stresses in emerging market economies, could undermine confidence in the global economic recovery,” said Yellen. With the situation in Ukraine creating tense relations between Russia, the U.S., and the EU, international strife is indeed a strain on the economy.
The markets certainly are paying attention to the conflict, at least based on analysis from Penn Capital Management senior portfolio manager Eric Green. “We need confidence that the Russia situation remains isolated; getting that would do a lot to stabilize the market,” he told Reuters. “Of course, anything that suggests more escalation is on the way would be a real negative for the market.” But escalation is what some in Washington seem to be demanding — of course, that’s not what they say they want — but Republican lawmakers are calling President Barack Obama’s foreign policy weak, and demanding harsher sanctions and responses to Russia. This is especially true for those that have only to gain from criticism of the left’s leadership with midterm elections upcoming.