U.S. Treasury Secretary Janet Yellen attempted to reassure Americans about the state of the global economy at a press conference on Tuesday. While acknowledging the possibility of an economic downturn, she said she did not anticipate one and believes that the U.S. banking system remains strong.
“I’ve not really seen evidence at this stage suggesting a contraction in credit, although that is a possibility,” Yellen said. “I believe our banking system remains strong and resilient; it has solid capital and liquidity.”
“So I’m not anticipating a downturn in the economy, although of course that remains a risk.”
One point of optimism was the Biden administration’s plans of “friend-shoring,” which Yellen viewed as an approach to deal with supply chain risks while allowing for continued global trade. She dismissed as “not valid” arguments that friend-shoring would cause fragmentation, stating that it retains tremendous scope for maintaining interconnected supply chains.
Yellen pointed to the recent events in Russia’s war in Ukraine as evidence of the importance of diversifying supply chains.
Yellen also commented on the global economy, stating that it remained in a better position than anticipated, a view that appeared to contrast with the International Monetary Fund’s (IMF) recent downgrade of its economic growth forecast. The IMF had lowered its estimate from 2.9 percent to 2.8 percent for 2023, citing financial market volatility.
Yellen to Visit China
China’s participation in the first principles meeting of the Sovereign Debt Roundtable was seen as “a positive sign” by the secretary. China will be an active participant in debt restructuring and providing financial aid to struggling nations like Sri Lanka, Yellen said.Yellen expressed her intention to visit China at “the appropriate time,” citing President Joe Biden’s emphasis on maintaining communication channels and opening up economic ties with other countries.
Amid ongoing challenges with global supply chains amid the war in Ukraine and the lingering effects of the pandemic, Yellen highlighted the need for vigilance in safeguarding the U.S. economy and the importance of keeping in frequent contact with economic partners.
“I’ve been in constant communication with my counterparts in recent weeks regarding these developments, and I look forward to continuing our dialogue this week,” she said.
The comments come amid renewed tensions over Taiwan following House Speaker Kevin McCarthy’s visit with Taiwanese President Tsai Ing-wen last week. Throughout the weekend, the Chinese military conducted various drills in the waters around the island nation.
