No evidence yet of credit crunch after banking turmoil: Yellen / Photo: Stefani Reynolds - AFP
No evidence yet of credit crunch after banking turmoil: Yellen
US Treasury Secretary Janet Yellen said Tuesday that she has not seen evidence of a contraction in credit, despite fears that households and firms could have a tougher time borrowing after recent banking sector turmoil.
Her comments come as central bankers, finance ministers and other participants gather in Washington for the International Monetary Fund and World Bank's spring meetings this week, where global growth and debt restructuring feature among key topics on the agenda.
While the IMF warned in a report released Tuesday that chances of a "hard landing" for the world economy have risen on the back of financial sector stress, Yellen told reporters: "I've not really seen evidence at this stage suggesting a contraction in credit."
But she acknowledged that this is a possibility, while stressing that the US banking system remains resilient.
She said she is not anticipating a downturn in the economy even if that remains a risk.
Yellen added in a speech that there remains "considerable room for improvement" in the global debt restructuring process.
The World Bank has warned of an especially tough outlook for the poorest economies as global growth slows while countries grapple with heavy debt burdens and weak investment.
And this week, ministers from both creditor and debtor countries, as well as representatives of private creditors will convene for a global sovereign debt roundtable.
Yellen said she looks forward to "robust discussion on improvements to the Common Framework process for low-income countries and the debt treatment process more broadly."
Yellen noted China's willingness to provide specific assurances in Sri Lanka's case recently "as a positive sign," with Beijing's moves enabling the IMF to proceed with a financial support and economic reform program.
- China visit on the cards -
She still hopes to visit China at "the appropriate time" as well, given that President Joe Biden has emphasized the importance of opening up and maintaining communication channels.
Meanwhile, the United States remains "vigilant" in the face of risks to the economy, she said, as countries continue tackling fallout from Russia's invasion of Ukraine while recovering from the pandemic.
"In some countries, including the United States, there have been recent pressures on our banking systems," she added.
"I've been in close communication with my counterparts over the past few weeks on these developments and I look forward to continuing that dialogue this week," she said.
On Washington's pursuit of "friend-shoring," or deepening economic ties with trusted partners, Yellen pushing back on the idea that this process would cause fragmentation.
Saying such arguments are "not valid," she defended the process as an approach to dealing with supply chain threats.
W.Janssens--RTC
