Federal Reserve Chair Janet Yellen said politicians across the globe should make sure their fiscal houses are in order during good times, so they can support economies when things go bad, blaming part of the slow recovery on weak government support.
Yellen said that as the financial crisis took hold in 2008, central banks were forced to turn to unconventional tools such as large-scale bond buying programs to prop up their economies. The tools helped support domestic recovery and global economic growth, but more action from fiscal authorities would have been helpful, she said.
"In the United States, fiscal policy has been much less supportive relative to previous recoveries," Yellen said in prepared remarks at a Bank of France symposium in Paris.
Yellen cited data that compared the large increase of government workers after the 2001 recession, to the decline of 650,000 government jobs after 2008.
The Fed chair did not comment on U.S. monetary policy. She said that central banks globally will need to normalize policy as economic activity and inflation return to normal, though the timing and speed of such a move will vary across countries. The normalization could lead to financial volatility, Yellen warned on Friday.
(Reporting by Michael Flaherty; Editing by Andrea Ricci)