Last month’s upheaval within the banking sector hasn’t pushed America off course from achieving a soft landing, US Treasury Secretary Janet Yellen told CNN’s Fareed Zakaria in an exclusive interview Friday.
“I do think there’s a path to bring down inflation while maintaining what I think all of us would regard is a strong labor market,” Yellen said. “And the evidence that I’m seeing suggests we are on that path.”
She added: “Are there risks? Of course. I don’t want to downplay the risks here, but I do think that’s possible.”
Yellen said the factors that have pushed up inflation go well beyond the tightness seen in the US labor market, notably Russia’s war in Ukraine, which raised food and energy prices; and pandemic-era supply chain disruptions, which caused key material shortages that gummed up critical pieces of the economy, such as the auto industry.
“We’re seeing those supply chain bottlenecks that boosted inflation, they’re beginning to resolve,” she said. “We had big shifts in the way people live and low interest rates, and housing prices rose a lot. Now, housing prices have essentially settled down.”
US economic data released this week showed continued signs of cooling in areas such as inflation and consumer spending.
Last month, the collapse of Silicon Valley Bank and Signature Bank triggered a crisis in the US banking sector, roiled financial markets and fueled uncertainty about the potential for negative ripple effects to spread throughout the broader economy.
Treasury, in conjunction with the Federal Reserve and the Federal Deposit Insurance Corporation, intervened after the regional bank failures to ensure bank customers could access all their money and to stave off future bank runs.
The failures, however, fueled uncertainty about the potential for additional bank collapses as well as possible aftershocks that could tip the US economy into a recession while the Fed is starting to slow its historic rate-hiking campaign to bring down inflation.
Yellen’s interview with Zakaria came near the tail end of a jam-packed week of meetings, public appearances and speeches for the Treasury secretary in conjunction with the IMF-World Bank Spring Meetings, where Ukraine was a key focus.
In the interview with Zakaria, Yellen said Russia should pay for the damage caused in Ukraine and talks are ongoing as to potential mechanisms to make that happen.
“That’s a responsibility that I think the global community expects Russia to bear,” she said. “This is something we’re discussing with our partners, but there are legal constraints on what we can do with frozen Russian assets.”
To watch Fareed Zakaria’s exclusive interview with Treasury Secretary Janet Yellen, tune in to “Fareed Zakaria GPS” this Sunday at 10 a.m. ET/PT.