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Yellen Predicts U.S. Banks to Tighten Lending Amid Recent Failures

U.S. Treasury Secretary Janet Yellen has expressed that banks are likely to further tighten lending following recent bank failures. This development could eliminate the need for additional Federal Reserve rate hikes, per a CNN interview transcript released on Saturday.

Janet Yellen
Janet Yellen

Stabilizing Deposit Outflows Post Bank Failures

Yellen mentioned in the "Fareed Zakaria GPS" interview that policy actions addressing the systemic threat from the failures of Silicon Valley Bank and Signature Bank (OTC: SBNY) last month have led to stabilized deposit outflows, with the situation remaining calm.

Banks to Exercise Greater Caution

According to Yellen, banks are expected to be more cautious in the current environment. The banking system had already experienced some tightening of lending standards before the recent bank failures, and there could be additional tightening shortly.

Impact on Economy and Fed Interest Rate Hikes

Yellen believes that the restriction on credit in the economy could serve as an alternative to further interest rate hikes by the Federal Reserve.