Yellen Predicts "Soft Landing" for U.S. Economy with Focus on Inflation and Housing Costs
By Susan Heavey and David Lawder
WASHINGTON (Multibagger) - In a recent interview, U.S. Treasury Secretary Janet Yellen expressed optimism about the state of the U.S. economy, indicating that both labor market conditions and inflation data point towards a "soft landing." Yellen highlighted the importance of bringing down housing costs as a key factor in taming inflation further.
During the interview with CNBC, Yellen also mentioned that based on insights from Federal Reserve officials, the central bank's interest rate is expected to continue its decline towards a neutral policy level.
"I always believed that there was a path to a soft landing, that it was possible to bring inflation down while maintaining a strong labor market, and to me, that's what the data suggests has happened," Yellen stated.
She further emphasized that there are indications that housing costs could see a decrease in the near future.
Addressing the issue of U.S. deficit reduction, Yellen stressed the importance of managing interest costs over time. However, she also mentioned that the Biden administration recognizes the significance of investing in sectors that are poised to drive future economic growth.
On the topic of financial system stability, Yellen assured that banks are well-capitalized. She acknowledged the challenges faced during the turbulence over uninsured deposits in 2023, which led to deposit runs in some banks. Yellen stated that efforts are being made to strengthen liquidity and access to the Fed's discount window for banks with uninsured deposits.
While Yellen noted that decisions regarding changes to bank deposit insurance limits rest with Congress, she highlighted ongoing discussions among banking regulators to ensure swift access to liquidity in times of need.
**Analysis:**
Janet Yellen's positive outlook on the U.S. economy, emphasizing a "soft landing" scenario, indicates a potential balance between managing inflation and sustaining a robust labor market. The focus on reducing housing costs as a measure to curb inflation aligns with efforts to maintain economic stability. Additionally, the assurance of well-capitalized banks and discussions around enhancing liquidity access signify steps towards bolstering financial system resilience. Overall, Yellen's remarks underscore the importance of strategic economic management and preparedness for future challenges, which could impact individuals' financial decisions and overall economic outlook.