U.S. Treasury Secretary Janet Yellen
U.S. Treasury Secretary Janet Yellen said on Wednesday that the U.S. economy is strong and consumer spending is buoyant but some areas are slowing, adding that she expects continued improvement in lowering inflation over the next two years.
Banks are likely to struggle in commercial real estate and there could be consolidation, Yellen said, but there is ample liquidity in the system and banks are generally able to withstand any stress.
Yellen added that inflation is likely to decline as the labor market remains strong, with the unemployment rate around 4%, up slightly from 3.7% in May.
“We’ve always thought of a 4% unemployment rate as a very strong job market,” Yellen said. “Clearly, Americans are happy with their job prospects. They’re finding jobs quickly,” according to CNBC.
She went on to say that the economy has slowed somewhat, easing pressure on the labor market, but “we still have a very healthy labor market with significant wage growth.”
Yellen said legislation to raise the debt ceiling and reduce the U.S. deficit by more than $1 trillion over a decade would support the Fed’s efforts to reduce inflation.
Responding to a question about the views of former Richmond committee chair Jeffrey Lacker, Yellen said it was a decision that the federal rate, currently between 5% and 5.25%, would be raised to 6% for the Fed .
Yellen said: “Consumer spending continues to grow rapidly, but you also see a slowdown in areas of the economy. This is a decision that my former Fed colleagues can make. As I said, I think it is important to try to bring inflation down. This is a matter of urgency.”
real estate pressure
Yellen said banks would face some difficulties related to commercial real estate as rising interest rates and remote work systems reduce demand for desks, but financial stress tests showed banks were well capitalized and banking regulators were watching closely.
“My overall reading is that the banking system has high levels of capital and liquidity and that does cause some pain, but the banks will be able to withstand the stress,” she said.
In response to a question about whether she supported more consolidation among banks, the Treasury secretary said the current diversified banking system of strong local banks, regional banks and large banks represented the “strength” of the U.S. economy but could There will be more consolidation.
Yellen said she doesn’t want to see diversity in the U.S. banking sector threatened, “but in this environment there is definitely pressure on some banks to be profitable and there is an incentive to see some consolidation. I wouldn’t be surprised to see some That moves forward.”
Cryptocurrency Regulatory Loopholes
Yellen added that U.S. financial regulators have the tools to protect crypto assets for U.S. investors and consumers, and it is appropriate for the SEC to review regulation for further action.
“Again, I see some gaps in the system and I think it’s appropriate to introduce additional regulations,” she said, without elaborating on those shortcomings. “We want to work with Congress with a view to passing more legislation.”
Yellen also said many countries in the European Union and elsewhere were working to implement a 15% minimum tax rate for global corporations that was agreed in 2021 but has not yet been approved by Congress.
Other countries taxing U.S. companies under the global minimum tax may persuade Congress to pass the rate, she said.