Financial institutions are likely to become somewhat more cautious in this environment, says US Treasury Secretary
US Treasury Secretary Janet Yellen said banks are likely to tighten lending further in the wake of recent bank failures, possibly negating the need for further Federal Reserve rate hikes, according to a CNN interview transcript released on Saturday.
Yellen said in the “Fareed Zakaria GPS” interview that policy actions to stem the systemic threat caused by last month’s failures of Silicon Valley Bank and Signature Bank had caused deposit outflows to stabilize, “and things have been calm.”
“Banks are likely to become somewhat more cautious in this environment,” Yellen said in the interview scheduled to air on Sunday. “We already saw some tightening of lending standards in the banking system prior to that episode, and there may be some more to come.”
She said that would lead to a restriction in credit in the economy that “could be a substitute for further interest rate hikes that the Fed needs to make.”
