NPR logo

Global Markets Slide As Fed Chair Janet Yellen Briefs Congress

  • Download
  • <iframe src="https://www.npr.org/player/embed/466457142/466457143" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
Global Markets Slide As Fed Chair Janet Yellen Briefs Congress

Economy

Global Markets Slide As Fed Chair Janet Yellen Briefs Congress

Global Markets Slide As Fed Chair Janet Yellen Briefs Congress

  • Download
  • <iframe src="https://www.npr.org/player/embed/466457142/466457143" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

Stock markets around the world were down again Thursday. In the U.S., the Dow and the S&P were down about 2 percent at mid-day. Federal Reserve Chair Janet Yellen is on Capitol Hill briefing lawmakers, and the price of oil slipped below $27 a barrel.

ARI SHAPIRO, HOST:

World financial markets are in more turmoil today as investors try to figure out what's going on with the global economy. In Washington, lawmakers were trying to do the same thing as they quizzed Federal Reserve Chair Janet Yellen for the second day in a row. NPR's John Ydstie reports.

JOHN YDSTIE, BYLINE: Today, Yellen was at the Senate Banking Committee delivering her semiannual report on the U.S. economy. Searching for reasons why global and U.S. markets are tumbling, Senator Dean Heller, a Republican from Nevada, asked this question.

(SOUNDBITE OF ARCHIVED RECORDING)

DEAN HELLER: Do you feel that you or the feds are responsible for this decline?

YDSTIE: Responsible because the Fed raised interest rates in December. Yellen pointed out there was very little market reaction right after that rate hike. She argued that the current selloff was precipitated by the devaluation of China's currency and the dramatic drop in oil prices.

(SOUNDBITE OF ARCHIVED RECORDING)

JANET YELLEN: Those things have been the drivers, and they've been associated with broader fears that have developed in the market about potential for weakening global growth.

YDSTIE: One reason for the selloff in the U.S. is that many investors believe the global growth slowdown will undermine U.S. growth which has been the strongest in the industrialized world. A Wall Street Journal survey of economists now puts the chance of a U.S. recession this year at 20 percent. Yellen is not convinced.

(SOUNDBITE OF ARCHIVED RECORDING)

YELLEN: We have seen global economic and financial developments that may well affect the U.S. outlook.

YDSTIE: But she said she doesn't think a recession is the most likely scenario. Today, U.S. stocks fell sharply but cut their losses late in the afternoon. The Dow industrials closed down 1.6 percent, and investors heading for the safety of the 10-year U.S. treasury pushed its interest rate down sharply.

Another factor in the tumble - central banks in Europe and Japan have moved to negative interest rates to boost growth. Negative rates will squeeze profits on already stressed European banks. Their stocks have been battered, and U.S. banks have been hit, too. That's partly because there's concern the Federal Reserve might also move to negative rates. Yellen said today the Fed is skeptical of the idea, but the policymakers were studying it, and she did not rule it out. John Ydstie, NPR News, Washington.

Copyright © 2016 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.