Yellen downplays banking woes, says world economy has improved

US TREASURY Secretary Janet Yellen shrugged off recent banking spasms to declare the global economy better off than six months ago as she laid out her agenda for a week of meetings with global finance officials in the US capital.

Yellen recalled that in February she described the global economy as being “in a better place than many predicted last fall,” before adding, “that basic picture remains largely unchanged,” according to the text of remarks she’s scheduled to deliver on Tuesday (Apr 11) in Washington.

The Treasury head is scheduled to take questions from the media following her remarks, which come at the beginning of the World Bank and International Monetary Fund’s spring meetings.

Yellen’s somewhat upbeat reading comes despite the dramatic failure of two mid-sized US lenders in March that threatened to destabilise the financial system and undermine growth. The near-collapse of European banking giant Credit Suisse Group, also in March, shook investors worldwide.

Her comments contrast with the IMF’s revised economic outlook for 2023, released on Tuesday, which trimmed its global growth projections to 2.8 per cent this year and 3 per cent in 2024. The report cited uncertainty and risks as financial sector stress added to pressures from tighter monetary policy and Russia’s invasion of Ukraine.

French Finance Minister Bruno Le Maire, speaking to reporters in Paris before departing for the US, also delivered a gloomier take.

“We are faced with an economic situation that his more difficult with global growth that is slowing and persistent inflation in many countries,” Le Maire said on Tuesday. “Global growth should be below 3 per cent in 2023, which is one of the weakest rates for decades, excluding the Covid pandemic and the financial crisis in 2008.”

Yellen, a former chair of the US central bank, noted that inflation remained too high, yet said she saw “welcome signs over the past half-year that inflation has moderated.”

The Treasury chief made only a glancing reference to the banking tremors in her prepared remarks, before voicing confidence in international financial infrastructure.

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Yellen downplays recession fears, expects US economy to grow

“The US banking system remains sound, with strong capital and liquidity positions,” she said. “The global financial system also remains resilient due to the significant reforms that nations took after the financial crisis.” BLOOMBERG