US Yellen: "Global Economy Is Improving... Beware of Downside Risks"

U.S. Treasury Secretary Janet Yellen stated on the 11th (local time) that she is cautious about downside risks to the global economy, including concerns over the banking sector crisis. However, she assessed that despite recent incidents such as the Silicon Valley Bank (SVB) collapse, the global economy is doing much better than expected in the second half of last year.

[Image source=Reuters Yonhap News]

At a press conference held ahead of the IMF and World Bank (WB) Spring Meetings, Secretary Yellen diagnosed that the global economy is in a better situation than what was forecast last fall, as energy and food prices stabilize and supply chain disruptions continue to improve.

She explained, "The basic picture has hardly changed from what was stated at the February G20 meeting?that the global economy is in a better state than last fall," adding, "The price cap on Russian crude oil has helped stabilize the global energy market." Regarding inflation, she also evaluated, "We have seen welcome signs that inflation has eased over the past six months."

This optimistic tone contrasts with the International Monetary Fund’s (IMF) announcement on the same day that the global economic growth rate will weaken to its lowest level in decades. In response, Secretary Yellen called it a "reasonable forecast" but added, "We think we should be more positive." She pointed out the importance of not viewing risk factors too negatively.

On this day, the IMF projected that the global economic growth rate will be 2.8% this year and 3.0% next year, each revised downward by 0.1 percentage points from the January forecast. The report included an assessment that uncertainty has increased due to high inflation, monetary tightening policies, the impact of Russia’s invasion of Ukraine, and recently, concerns over the banking sector.

While acknowledging concerns arising from the recent SVB bankruptcy, Secretary Yellen emphasized, "The U.S. banking system is sound and has sufficient capital and liquidity." She also evaluated the global financial system as resilient due to reforms introduced after the 2008 global financial crisis. She added, "Although risks remain, we are not expecting a recession," and noted that she has not yet seen evidence that credit tightening is cooling U.S. economic activity.

However, Secretary Yellen also stressed that vigilance regarding global downside risks has not been relaxed. She pointed out, "The U.S. labor market remains strong, and inflation is still high."

On the same day, Bruno Le Maire, France’s Minister of Finance, who was heading to the U.S. from Paris to attend the Spring Meetings, also expressed concern, saying, "Many countries are facing more difficult economic conditions as growth slows and inflation persists."

This content was produced with the assistance of AI translation services.