U.S. Markets

Fed's Yellen says won't completely rule out negative rates

U.S. Federal Reserve Chair Janet Yellen holds a press conference following the two-day Federal Open Market Committee (FOMC) policy meeting in Washington March 16, 2016. REUTERS/Kevin Lamarque

(Reuters) - Federal Reserve Chair Janet Yellen said on Thursday that while she “would not completely rule out the use of negative interest rates in some future very adverse scenario,” the tool would need a lot more study before it could be used in the United States.

Yellen, in responses to written questions from U.S. Congressman Brad Sherman following her February testimony on Capitol Hill, said the Fed plans to raise interest rates gradually, given its expectations that the economy will continue to strengthen and inflation will move back up to the Fed’s 2 percent goal. She also said that if the economy unexpectedly takes a turn for the worse, the Fed will adjust its stance.

Central banks in Europe and Japan have used negative interest rates to try to stimulate their economies, and Yellen said the Fed is attempting to learn as much as it can from their experiences. Before using negative rates at home, she said, policymakers would need to consider a number of issues, “including the potential for unintended consequences.”

The latter, dated May 12, was released by Sherman’s office.

Reporting by Ann Saphir; Editing by Meredith Mazzilli