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Treasury Secretary Janet Yellen says the US economy is strong despite recent bank turmoil

In this post:

  • US Treasury Secretary Janet Yellen expressed confidence in the American economy, stating that it remains strong and resilient despite recent turbulence in regional financial institutions.
  • Yellen also expressed optimism about the global economy, stating that it was in a better place than many had predicted last fall. She maintained that this basic picture has remained largely unchanged.

US Treasury Secretary Janet Yellen expressed confidence in the American economy, stating that it remains strong and resilient despite recent turbulence in regional financial institutions. Speaking at a press conference ahead of the spring World Bank meetings, Yellen noted that she has not seen evidence of a contraction in credit, although it is a possibility. She also emphasized the solid capital and liquidity of the US banking system.

Yellen lauds US economic performance

Yellen lauded the country’s economic performance, citing robust consumer spending, moderating inflation, and solid job creation. However, she acknowledged that a downturn in the economy remains a risk.

During the G20 meeting in February, Yellen also expressed optimism about the global economy, stating that it was in a better place than many had predicted last fall. She maintained that this basic picture has remained largely unchanged.

Yellen’s remarks come amid growing concerns about the stability of the financial sector following the collapse of two US regional banks and the near-collapse of Credit Suisse. Despite the uncertainty, Yellen remains confident in the strength of the American economy and the global economic outlook.

US Treasury Secretary Janet Yellen expressed optimism about the global economic outlook during a press conference on Tuesday, despite recent downgrades to growth forecasts by the International Monetary Fund (IMF). Yellen’s assessment contrasted with the IMF’s warning of increased financial market volatility, which it cited as a reason for reducing its forecast for global growth from 3.4% in 2022 to 2.8% in 2023.

Yellen acknowledged the recent stress in the financial sector, citing the collapse of two US regional banks, Silicon Valley Bank and Signature Bank, as well as the near-collapse of Credit Suisse, which was saved by a merger with rival UBS. However, she maintained that the US banking system remains sound and praised the “decisive and forceful actions” taken by the US Treasury, the Federal Reserve, and the Federal Deposit Insurance Corporation to stabilize the situation.

IMF’s warning

The IMF’s Global Financial Stability Report, released on Tuesday, warned that the recent turmoil in financial markets could complicate the task of central banks, particularly as inflationary pressures persist. In the United States, the Federal Reserve is currently working to cool down the highest inflation seen in four decades.

Yellen also addressed other macroeconomic factors that could affect global economic stability, including Russia’s ongoing war in Ukraine and the lack of an agreement on the US debt limit. In January, the Treasury took “extraordinary measures” to allow the US government to continue paying its bills, but economists and the government estimate that a default could occur as early as this summer.

Despite these challenges, Yellen pledged continued economic and humanitarian support for Ukraine as it defends itself against Russia’s invasion. “If the war continues, we’ll have to continue to work with our partners to provide the support that Ukraine needs, and we’re committed to doing that,” she said.

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