US Treasury Secretary Yellen says overall economic outlook ‘reasonably bright’, despite some global downside risks

US Treasury Secretary Janet Yellen on Tuesday said she remained vigilant to downside risks facing the global economy, given Russia’s ongoing war against Ukraine and banking pressures, but the overall outlook was “reasonably bright.”

Yellen, speaking at a news conference, pushed back against warnings by the International Monetary Fund of bigger risks associated with severe financial tensions.

“I wouldn’t overdo the negativism about the global economy,” Yellen said, when asked about a slightly trimmed IMF global growth forecast for 2023 which warned that a flare-up of financial system turmoil could slash output to near recessionary levels. “I think we should be more positive.”

Yellen said she had not seen evidence suggesting a squeeze in credit after two U.S. bank failures last month, although that was a possibility. She said the U.S. banking system remained sound, with strong capital and liquidity positions, and the global financial system is resilient due to the significant reforms enacted after the 2008 financial crisis.

“The US economy is obviously performing exceptionally well with continued solid job creation, inflation gradually moving down, robust consumer spending,” she said. “So I’m not anticipating a downturn in the economy, although, of course, that remains a risk.”

Yellen told reporters the global economy was in a better place than projected last fall, with energy and food prices having stabilized and supply chain pressures continuing to ease.

A price cap on Russian oil was helping to stabilize global energy markets while reducing Russia’s primary source of revenue, she said, adding that ending the war would be the single biggest help for the global economy.

“Still, we remain vigilant to the downside risks,” she said.

Speaking at the start of a week of meetings at the International Monetary Fund and World Bank, Yellen said the US labor market was strong, but inflation remained too high.

The US government last month took emergency actions after the failures of Silicon Valley Bank and Signature Bank, and subsequently announced steps to increase supervision of mid-sized banks that do not require approval by the split Congress.

She said Treasury was committed to working through global bodies like the Financial Stability Board and the Basel Committee on Banking Supervision, while addressing vulnerabilities in nonbank financial institutions.