Yellen: Fed’s need to raise rates may go away

US Treasury Secretary Janet Yellen said banks will be more cautious and tighten lending after the recent bankruptcies. Yellen said this situation may eliminate the need for further rate hikes by the US Federal Reserve (Fed).

Yellen said in an interview with CNN yesterday that deposit outflows have stalled and all is calm due to policy steps taken to stem the systemic threat posed by the failures of Silicon Valley Bank and Signature Bank last month.

THE FED CAN REPLACE

“Banks will probably be a bit more cautious in this environment,” Yellen said. “We have seen some tightening in credit standards in the banking system, and there may be more,” she said.

Yellen said this would lead to a “credit squeeze” that “could supersede any other rate hikes the Fed has to do.”

Yellen said she didn’t see anything “dramatic or significant” that would change her economic outlook. “So I think the strong job market and moderate growth will continue as inflation falls.”