Sept. 10 (Bloomberg) -- Federal Reserve Bank of San Francisco President Janet Yellen said the U.S. economy is under ``downward pressure'' from the turmoil in credit and housing markets.

``It is critical to take a forward-looking approach -- gauging the effects of recent developments on the outlook, and, importantly, the risks to that outlook,'' Yellen said in a speech to a conference in San Francisco. Declining home prices and rising unemployment may cause ``significant'' risks to consumer spending, she said.

Yellen noted that investors increased bets that the Fed will reduce interest rates next week, with at least 0.75 percentage point of cuts by year-end...

``I see significant downward pressure based on recent data indicating further weakening in the housing sector and the tightening of financial markets,'' Yellen said at the annual meeting of the National Association for Business Economics. Higher interest rates and ``tighter terms'' on home loans may also lead to cutbacks in consumer spending, she said.