Yellen: 'Not anticipating a downturn' in the US economy

Minneapolis CNN  — 

The global economy remains in a better place than many have expected and the US economy is seeing progress on inflation, said US Treasury Secretary Janet Yellen at a press conference ahead of the spring World Bank meetings.

“[During the G20 meeting in February], I said that the global economy was in a better place than many predicted last fall,” Yellen said. “That basic picture has remained largely unchanged.”

Yellen’s speech and the IMF-World Bank Spring Meetings land just weeks after the collapse of two US regional banks, Silicon Valley Bank and Signature Bank and the global banking giant Credit Suisse teetered on the brink of collapse before merging with rival UBS.

The Treasury, in conjunction with the Federal Reserve and the Federal Deposit Insurance Corporation, intervened after the US regional bank failures to ensure bank customers could access all their money and to attempt to stave off future bank runs.

Yellen at the time said the “decisive and forceful actions” taken helped stabilize the situation and added that the “US banking system remains sound.”

Still, the emergence of stress in financial markets comes at a precarious time for central banks, according to the IMF’s Global Financial Stability Report released Tuesday.

The turmoil “complicates the task of central banks at a time when inflationary pressures are proving to be more persistent than anticipated,” according to the report. “If financial strains intensify significantly and threaten the health of the financial system amid high inflation, trade-offs between inflation and financial stability objectives may emerge.”

In the United States, the Fed is in the throes of a yearlong effort to cool down the highest inflation seen in four decades.

Inflation has moderated in recent months; however, the banking turmoil, along with broader global and domestic macroeconomic factors — including Russia’s ongoing war in Ukraine and the lack of an agreement on the US debt limit — heighten uncertainty about future economic stability.

In January, Treasury undertook “extraordinary measures” that allow the US government to continue paying its bills. However, those efforts serve as a stopgap, and a default could come as early as this summer, economists and the government has estimated.

Yellen has repeatedly pressed for congressional action to address the borrowing cap.

This story is developing and will be updated.