Benzinga - U.S. Treasury Secretary Janet Yellen remains convinced that last month's banking sector turmoil hasn't pushed the country off the course of achieving a soft landing.
In a recent interview with CNN, Yellen said banks may become more cautious and tighten their lending amid recent banking failures. Doing so would negate the need for further interest rate hikes from the Federal Reserve, she said.
"We already saw some tightening of lending standards in the banking system before that episode, and there may be more to come," she said, explaining that lending pullback would lead to a restriction in credit in the economy and "could be a substitute for further interest rate hikes" that the Federal Reserve needs to make.
Yellen added that deposit outflows from the banking system have stabilized, and the situation has been calm. She said she has not seen anything "dramatic enough or significant enough" to alter her economic outlook.
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Speaking on inflation, Yellen said, "I do think there's a path to bring down inflation while maintaining what I think all of us would regard as a strong labor market. And the evidence that I'm seeing suggests we are on that path. Are there risks? Of course. I don't want to downplay the risks here, but I think that's possible."
Yellen said the U.S. is seeing supply chain bottlenecks that boosted inflation but that "they're beginning to resolve."
"We had big shifts in the way people live, and low-interest rates and housing prices rose a lot," she said. "Now, housing prices have essentially settled down."
Last month, Yellen warned that financial regulations may have become too loose, potentially putting the U.S. financial system at risk. She highlighted the importance of financial stability and the need for continued progress.
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Photo: European Central Bank on flickr
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