Yellen says the US economy is strong, but some areas are slowing

The US economy is strong despite robust consumer spending, but some areas are slowing, Treasury Secretary Janet Yellen said Wednesday, adding that she expects continued progress in reducing inflation over the next two years.

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

He said legislation to raise the debt ceiling and reduce the US deficit by more than $1 trillion over a decade would support the Federal Reserve’s efforts to reduce inflation.

When asked about Richmond Federal Reserve Chairman Jeffrey Lacker’s opinion that the federal funds rate, between 5% and 5.25% now, will need to rise to 6% to tame inflation, Yellen said it is a decision for the Fed to make.

“Consumer spending has continued to grow quite strongly, but you also see areas of the economy that are slowing down,” he said. “And that’s a judgment my Fed colleagues are very capable of making. As I said, I think the important thing is to try to bring inflation down. That’s the top priority.”

Yellen said banks will face some commercial real estate woes as higher interest rates and remote work arrangements have reduced demand for office space, but stress tests have shown financial institutions have a adequate capital and banking supervisors are closely examining the situation.

Asked whether it would support more consolidation among banks, he said the current diversified banking system with strong community banks, regional banks and big banks is a “strength” for the US economy, but further consolidation is likely.

Yellen said she doesn’t like to see US banking diversity under threat, “but certainly in this environment, some banks are under earnings pressure and there is a rationale to see some consolidation. And I wouldn’t be surprised to see something like this happen in the future.”

Source: Terra

Rose

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