US Treasury Secretary Janet Yellen said on Saturday (15) that the expected credit crunch could accelerate the decline in inflation and, as a result, reduce the need for further interest rate hikes by the Federal Reserve (Fed). .
In an interview with CNN, Yellen said that the recent turmoil in the financial sector, after the collapse of regional institutions, should make banks more cautious in granting loans. “We already saw some tightening of credit standards in the banking system before this episode, and there may be more to come,” she noted.
Yellen, however, assesses that the rapid response of regulators has calmed the markets and reduced uncertainties, in a context of well-capitalized banks. Therefore, in her view, the US can still have a “soft landing”, that is, a scenario of controlling inflation without significant impacts on economic growth and employment.
“I think there is a way to reduce inflation while maintaining what I think we would all consider a strong job market. And the evidence I’m seeing suggests that we’re on that path,” she argued.