The labor market and inflation data point to a “soft landing” for the US economy, according to U.S. Treasury Secretary Janet Yellen’s remarks on Thursday. However, the “last mile” in controlling inflation is driving down housing costs.
In a live interview, Yellen said CNBC that the Federal Reserve’s policymakers’ remarks would likely lead to further declines in the benchmark overnight interest rate until it reaches a level that is neutral for policy.”To me, the evidence suggests that has happened,” Yellen remarked. “I always believed that there was a path to a soft landing, that it was possible to bring inflation down while keeping a healthy job market.”
She went on to say that there was cause for optimism regarding a decrease in housing expenses.
In order to keep interest rates under control over time, Yellen also stated that the US deficit must be reduced. However, she noted that the Biden administration thought it was critical to keep funding areas of the economy that would support future growth.
Yellen stated that banks were well-capitalized with regard to the stability of the financial system, but that “a good deal of thought is going into how to shore up the liquidity, the access to the Fed’s discount window for banks that do have uninsured deposits” following the uninsured deposit crisis that erupted in 2023 and resulted in bank runs in certain instances.
She stated that Congress should decide whether to raise the caps on bank deposit insurance, but banks authorities were already debating strategies to provide easy access to liquidity when needed.
