The US economy is strong against a backdrop of strong consumer spending, but some areas are slowingrecognized this Wednesday the Secretary of the Treasury, Janet Yellen, who expects a continued progress in reducing inflation over the next two years.
In an interview with CNBC, Yellen also argued that although the banks may struggle with commercial real estate and face some consolidationthere is a lot 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 this is a decision of the US central bank.
“Consumer spending has continued to grow quite robustly, but you also see areas of the economy that are slowing down,” Yellen stated.
“This is a judgment that my former colleagues at the Fed are very capable of making. As I’ve said, I think the important thing is to try to bring inflation down. That’s a top priority.”
As indicated, the banks will face some difficulties related to commercial real estate due to rising rates and remote working, which has reduced the demand for office space, but stress tests have shown they are adequately capitalized, and banking supervisors are closely monitoring the situation.
“My general opinion is that the level of capital and liquidity in the banking system is solid and that, even if there are some problems, the banks should be able to withstand the stress”indicated.
Asked if he would support further consolidation among banks, he said the current diversified system, with community, regional and large banks, is a “strength” for the US economy, but that further consolidation is likely.
Yellen indicated that He wouldn’t 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: Ambito
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