Yellen says US banks may tighten lending and negate need for more rate hikes

David Lawder

In the midst of recent bank failures, banks are likely to become more optimistic and may reduce lending further, actually negating the need for additional Federal Reserve interest rate increases, according to WASHINGTON( Reuters )- U.S. Treasury Secretary Janet Yellen.

In a” Fareed Zakaria GPS” meeting, Yellen claimed that” deposit outflows have stabilized and things have been relaxed” in response to policy measures to stop the widespread threat posed by Silicon Valley Bank and Signature Bank’s’s failures next month.

In the meeting, which will air on Sunday, Yellen stated that banks are likely to turn a little more careful in this situation. Due to that part, the bank system’s’s lending standards had already begun to tighten, and there may be more to come.

That, according to her, may result in an economic record limitations that” could be a supplement for higher interest rate hikes that the Fed needs to make.”

However, Yellen claimed that she had not yet observed thing” spectacular or significant enough” to change her perspective on the economy.

Therefore, she said,” I believe the outlook is still for moderate growth and ( a) a continued strong labor market with falling inflation.”

Yellen is not the only accounting official anticipating some bank credit reduction as a result of the recent upheaval in the commercial sector. As they anticipate banks to limit borrowing in the coming months, some Fed officials have advised the U.S. central bank to take a more optimistic stance.

In addition to demonstrating that payment flows have stabilized in the last two weeks following an initial flood of payments around the time of the SVB and Signature problems in mid-March, the Fed’s’s weekly banks balance sheet data has not yet indicated a substantial decline in bank financing.

In response to worries about the security of debris, Yellen was questioned about whether it would be wise to create a central bank digital currency that would give Americans access to the Fed instantly.

There are significant benefits and drawbacks to such a choice, so it needs to be carefully considered, but it might be anything that affects Americans in the future, according to Yellen.

LARGE DOMINANCE

The$ 60 per barrel price cap on Russian oil imposed by Western countries was turning Moscow’s’s anticipated budget surpluses into deficits, according to Yellen, who also claimed that U.S. – led sanctions and export controls on Russia were depriving it of materials for its war in Ukraine.

Russia has been forced to turn to Iran and North Korea for military supplies and equipment as a result of import restrictions, and the United States is taking action to stop sanctions escape, according to Yellen.

However, she continued,” We believe that his ( President Vladimir Putin’s’s ) military is seriously lacking in the tools necessary to wage war.

Yellen acknowledged possible dangers when asked if sanctions may lessen the dollar’s’s status as the global reserve currency.

Therefore, there is a chance that, over time, the identity of the dollar could be threatened if we use commercial restrictions that are connected to the role of money, as you stated. But we make sure to use this tool wisely ,” Yellen said, adding that sanctions work best when they are supported by friends.

China, Russia, and Iran are motivated by the sanctions to find a currency other than the dollar, but this is” not easy” to do because it is supported by U.S. Treasuries, which are the safest and most liquid assets in the world.

Funds are frequently used. We have very robust funds markets and the rule of law, both of which are crucial for a coin that will be used for transactions around the world, according to Yellen. ” And we haven’t seen any other nation that possesses the administrative infrastructure necessary for its money to serve the community in this way.”

( Editing by Andrea Ricci and Paul Simao, reporting by David Lawder and Daniel Burns. )

This week has seen a lot of significant stories in the U.S. and elsewhere. OAN Newsroom Updated 7:19 Do on Saturday, April 15, 2023.

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