© Reuters. FILE PHOTO: US Treasury Secretary Janet Yellen testifies before a Senate Appropriations Subcommittee on General Government and Financial Services hearing on President Biden’s proposed budget request for the Treasury Department for the fiscal year 2024.
WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen said banks are likely to further tighten lending in the wake of recent bank failures, possibly negating the need for further Fed rate hikes Federal, according to a transcript of a CNN interview released Saturday.
Yellen said in the “Fareed Zakaria GPS” interview that political actions to curb the systemic threat caused by last month’s failures of Silicon Valley Bank and signature bank (OTC:) had caused deposit outflows to level off, “and things have been calm.”
“Banks are likely to get a little bit more cautious in this environment,” Yellen said in the interview scheduled to air on Sunday. “We already saw a tightening of credit standards in the banking system before that episode, and there may be more to come.”
She said that would lead to a credit squeeze in the economy that “could be a substitute for more interest rate hikes that the Fed needs to do.”