Yellen says shootings, terror attacks could damage economy

Yellen testifies before a Joint Economic Committee hearing on "The Economic Outlook" in Washington.
Yellen testifies before a Joint Economic Committee hearing on "The Economic Outlook" in Washington.AFP

WASHINGTON (AFP) - A surge in mass shootings and terror attacks have the potential to damage the economy, Federal Reserve chairman Janet Yellen said on Thursday as the United States reeled from the latest incident in California.

Asked about the risk to US growth from domestic and international terrorism in a congressional hearing, Yellen said the Fed keeps its eyes on the economic impact.

"Those risks are ones that we watch very carefully," she said.

"It does have the potential to have a significant economic effect."

Speaking a day after 14 people were killed in a yet-to-be-explained mass shooting in San Bernardino, California, and three weeks after Islamic State in Iraq and Syria (ISIS) attackers killed 130 in Paris, Yellen said that she had not seen a "significant effect" yet on economic activity.

However, she added, "certainly in the aftermath of the financial crisis, we've seen rather cautious behaviour on the part of households and firms."

"I would add geopolitical risk as a further factor that is causing that kind of cautiousness," she added.

Despite worries about risks to global growth, Yellen voiced confidence in the US economy continuing to grow at the current moderate rate.

Markets expect that the Fed will decide to raise interest rates for the first time in more than nine years in its Dec 15-16 policy meeting.