Treasury Secretary Janet Yellen has said she’s seen no indication of a contraction in credit following the failure of a string of US banks last month.
(Bloomberg) — Treasury Secretary Janet Yellen has said she’s seen no indication of a contraction in credit following the failure of a string of US banks last month.
Maybe she should talk to her Biden administration colleague, Lael Brainard.
“Banks are showing some signs of pulling back a little on credit,” Brainard, the new head of the President Joe Biden’s National Economic Council, told CNN’s Poppy Harlow at Semafor’s World Economy Summit on Wednesday.
Her comment came just a day after Yellen spoke to reporters in Washington about a variety of topics, including the banking turmoil. “I’ve not really seen evidence at this stage suggesting a contraction in credit, although that is a possibility,” the treasury secretary said.
Yellen’s remarks came in the wake of data from the Federal Reserve on Friday showing that bank loans tumbled $45.1 billion in the week ended March 29, among the biggest weekly declines since the financial crisis some 15 years ago.
The failure of Silicon Valley Bank and Signature Bank last month shook financial markets, forcing the Fed and the Federal Deposit Insurance Corp. to take emergency steps to prevent the contagion from spreading.
‘Remarkably Resilient’
Brainard said the financial stresses stemming from the failures seem to be easing. “There’s good reason to think the situation has stabilized,” she said.
Like Yellen the day before, Brainard highlighted the strength of the US economy in her remarks. “It is remarkably resilient,” the former Fed vice chair said.
Pressed by CNN’s Harlow about whether a recession was more likely following the bank failures, Brainard replied, “We are seeing good signs across the board even with banks doing what they need to do in shoring up their balance sheets.”
She said a pullback in lending by the banks might assist the Fed in its efforts to slow the economy down and reduce elevated inflation.
Fed staff expect the fallout from the bank failures to push the US into a mild recession later this year, according to the minutes of the central bank’s March 21-22 policymaking meeting that were released Wednesday.
Brainard said inflation is coming down, but there is more work to do in reducing it.
“The trajectory here is a good one on inflation,” she said.
Consumer prices rose 5% in March from a year earlier, down from 6% in February and a high of 9.1% in June of last year, data released by the Labor Department on Wednesday showed.
–With assistance from Gregory Korte.
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