Yellen said banks may struggle with commercial real estate and could see consolidation, but there is enough liquidity in the system and banks will generally be able to withstand any pressure.
Yellen added that inflation could ease as the labor market remains strong and unemployment is around 4%, up slightly from 3.7% in May.
“We’ve always thought that a 4% unemployment rate is a very strong job market. It’s clear that 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, wage gains are significant.”
Yellen 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.
In response to a question about the opinion of Jeffrey Lacker, former Richmond Council Chairman, that the federal interest rate, which is currently between 5% and 5.25%, will be raised to 6% to control the inflation, Yellen said it was a move for the Federal Reserve.
“Consumer spending has continued to grow very rapidly, but you also see sectors of the economy slowing down,” Yellen said. “And that’s a decision that my former colleagues at the Fed can make. And like I said, I think the important thing is to try to get inflation down. That’s the top priority.
real estate pressure
Yellen said banks will face some difficulties with commercial real estate due to higher interest rates and a remote work system that has reduced demand for work desks, but stress tests have shown that banks are sufficiently capitalized and that banking supervisors are watching closely.
“My overall reading is that the level of capital and liquidity in the banking system is strong, and it is true that there will be some pain associated with that, but the banks will be able to absorb the pressure,” he said. she declared.
In response to a question about her support for greater consolidation among banks, the Treasury Secretary said the current diversified banking system of local banks, regional banks and large, strong banks is a “strength” for the US economy, but that further consolidation is likely.
Yellen said she didn’t want to see a threat to U.S. banking diversification, “but in this environment, some banks are certainly under earnings pressure and there’s a willingness to see some consolidation. That doesn’t wouldn’t surprise me to see some of this moving forward.”
Gaps in Cryptocurrency Regulation
Yellen added that U.S. financial regulators have tools in place to protect U.S. investors and consumers when it comes to crypto assets, and it’s appropriate for the SEC to review the regulations for further action.
“As well, I see holes in the system, and I think it is appropriate to introduce additional regulations,” she said, without specifying the gaps, “we would like to work with Congress to pass additional legislation”.
Yellen also said that many countries in the European Union and other regions are working to implement the minimum tax rate of 15% for global companies that was agreed in 2021, but has not. been ratified by Congress.
She said other countries collecting certain taxes from U.S. businesses as part of the global minimum tax could persuade Congress to adopt that percentage.
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