As recession fears mount in the U.S., Fed Chair Janet Yellen conceded there's a "chance" of a downturn ahead.
She also said the central bank is studying whether negative interest rates would help should conditions worsen.
"There is always some chance of recession in any year," she said. "But the evidence suggests that expansions don't die of old age."
Asked by Republican Sen. Bob Corker whether the monetary policy-making Federal Open Market Committee would consider going to negative interest rates, which would entail charging banks to store reserves at the Fed, Yellen left the door open. She repeated a statement she said Wednesday that the Fed had considered negative rates in 2010 but decided that wouldn't be the best course at that time.
"In light of the experience of European countries and others that have gone to negative rates, we're taking a look at them again, because we would want to be prepared in the event that we would need (to increase) accommodation. We haven't finished that evaluation. We need to consider the institutional context and whether they would work well here. It's not automatic," she said.
Read MoreNext move could see Fed rate CUT
"We wouldn't take those off the table, but we have work to do to judge whether they would be workable here," she said.
Susan Walsh | AP
Federal Reserve Board Chair Janet Yellen testifies on Capitol Hill in Washington, Thursday, Feb. 11, 2016.
Markets participants are skeptical about the effectiveness of negative rates in the U.S. The Dow industrials shed as much as 230 points on top of earlier losses at one point during Yellen's testimony.
Bond guru Jeff Gundlach of DoubleLine Capital told CNBC he doens't "think it's going to happen," adding that "empirical evidence (is) piling up that negative rates are harmful, not helpful."
Banks currently have $2.27 trillion in reserves at the Fed, compared to the required $117.3 billion required. The Fed pays a 0.5 rate on those deposits.
Questions have arisen over the legality of negative interest on excess reserves. Sen. Pat Toomey (R-Pa.) cited a 2010 memo that has gotten some circulation lately that points out there are potential legal issues. Toomey cited one portion saying "it is not at all clear that the Federal Reserve act permits negative IOER rates."
Toomey also questioned whether a negative IOER rate would end up seeing savers pay a fee to keep money at banks. Yellen said she does not believe that is the case of the European countries where it has been tried.
"Before we take a step like that, we would have to think through all of the institutional details and how they would work..." she said.
However, she said "I'm not aware of any legal restrictions" on imposing negative rates.
Speaking Thursday in the second day of her semiannual testimony to Congress, the U.S. central bank chief also said conditions this year caught Fed officials off guard. Markets have been tumbling as oil prices plunge, with traders now pricing in the chance that the Fed's next move could be a rate cut rather than hike.
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