US banks must restrict credit, says Yellen – 04/15/2023 – Market

US Treasury Secretary Janet Yellen said US banks are likely to tighten lending conditions following recent bank failures. That may assuage the need for further rate hikes from the Federal Reserve, according to a transcript of an interview she gave to CNN released on Saturday (15).

Yellen said in an interview on “Fareed Zakaria GPS” that policy actions to contain the systemic threat posed by last month’s failures at Silicon Valley Bank and Signature Bank had caused deposit outflows to stabilize, “and things have been quiet “.

“Banks are likely to become a little more cautious in this environment,” Yellen said in the interview, which will air on Sunday. “We’ve already seen some tightening of lending standards in the banking system before this episode, and there could be some more to come.”

She said that would lead to a tightening of credit in the economy that “could be a substitute for more interest rate hikes that the Fed needs to do.”