Janet Yellen Optimistic About Soft Landing for U.S. Economy Amid Inflation Concerns

U.S. Treasury Secretary Janet Yellen stated that labor market and inflation data indicate the U.S. economy is heading towards a 'soft landing.' She emphasized the importance of reducing housing costs and highlighted the need for deficit reduction and investment for future growth. Yellen also addressed financial system stability and bank liquidity.

U.S. Treasury Secretary Janet Yellen expressed confidence on Thursday that the labor market and inflation data point towards a 'soft landing' for the U.S. economy. However, she noted that reducing housing costs was crucial in taming inflation. Yellen conveyed these views in a live interview with CNBC, adding that comments from Federal Reserve officials suggest the central bank's benchmark overnight interest rate is on track to decline to a neutral policy level.

'I've always believed in the possibility of a soft landing – reducing inflation while maintaining a strong labor market,' Yellen stated. She added that there were signs of potential declines in housing costs.

Yellen also stressed the necessity of U.S. deficit reduction to manage interest costs over time. However, she emphasized that the Biden administration prioritizes continued investment in economic sectors poised for future growth. On financial system stability, Yellen remarked that banks remain well-capitalized despite challenges posed by uninsured deposits in 2023. She mentioned ongoing discussions among banking regulators to improve access to liquidity and the Federal Reserve's discount window for banks with uninsured deposits.

Yellen concluded by noting that any changes to bank deposit insurance limits fall under Congress's jurisdiction, while regulators are focused on enhancing liquidity accessibility when required.

(With inputs from agencies.)