Federal Reserve Chair Janet Yellen said the Fed was taking another look at negative interest rates as a potential policy tool if the U.S. economy faltered, after central banks in Europe were able to drive borrowing costs below zero.

“We had previously considered them and decided that they would not work well to foster accommodation back in 2010,” Yellen said Thursday, answering questions during a second day of testimony before Congress. “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 needed to add accommodation.”

Yellen’s comments shed a bit more light on the state of the internal debate at the Fed than her remarks on Wednesday before the House Financial Services Committee.

A 2010 Fed staff memo posted on the central bank’s website late last month showed Fed economists grappled with a number of issues related to implementation of negative rates at the time, including possible legal obstacles. Yellen said Thursday that negative rates might be legal, but the question remained open to further examination.

“I am not aware of any legal restriction that would mean that we could not establish negative rates, but I will say that we have not looked carefully at the legal side of this,” Yellen said Thursday.

European Experience

Since 2010, the European Central Bank, the Bank of Japan and others have cut their benchmark rates below zero to provide their economies additional stimulus. Trading in eurodollar options shows investors have become increasingly cautious in recent weeks that the Fed might be next to do so amid faltering global markets and rising concerns over global growth.

“We haven’t finished that evaluation,” Yellen said. “We need to consider the U.S. institutional context and whether they would work well here. It’s not automatic. There are a number of things to consider. So I wouldn’t take those off the table, but we would have work to do to judge whether they would be workable here.”