Yellen: US economy is strong, but some areas are slowing down

The US economy is strong against a backdrop of robust consumer spending, but some areas are slowing, Treasury Secretary Janet Yellen said Wednesday, expecting continued progress in lowering inflation over the next few years. two years.

In an interview with CNBC, Yellen also said that while banks may struggle with commercial real estate and face some consolidation, there is plenty of liquidity in the system and they should generally be able to withstand any stress.

Yellen said legislation to raise the debt limit and reduce the deficit by more than $1 trillion over a decade will support the Federal Reserve’s efforts to reduce inflation.

Asked about Richmond Fed President Jeffrey Lacker’s opinion that the federal funds rate, currently between 5 and 5.25%, will have to go up to 6% to control inflation, Yellen indicated that that is a decision of the US central bank.

“Consumer spending has continued to grow fairly robustly, but you also see areas of the economy slowing downYellen stated.

“This is a judgment my former Fed colleagues are quite capable of making. As I said, I think the important thing is to try to reduce inflation. That is an absolute priority”, he added.

He said banks will face some difficulties related to commercial real estate due to rising rates and remote working, which has reduced demand for office space, but stress tests have shown they have adequate capital. , and banking supervisors are closely studying the situation.

“My general opinion is that the level of capital and liquidity in the banking system is strong and that, even if there are some problems, the banks should be able to withstand the stress.”, he indicated.

Asked if he would support further consolidation among banks, he said the current diversified system, with community, regional and large entities, is a “strength” for the US economy, but that further consolidation is likely.

Yellen said she would not like to see America’s banking diversity threatened, “but certainly in this environment some banks are experiencing earnings pressure and there is motivation to see some consolidation”.

Source: Reuters