Yellen: Lending pullback could be substitute for more Fed hikes

“Banks are likely to become somewhat more cautious in this environment,” Yellen said in an interview on CNN’s Fareed Zakaria GPS scheduled to air on Sunday. “That does tend to lead to somewhat greater restriction in credit that could be a substitute for further interest-rate hikes that the Fed needs to make.”

She remained optimistic the US could avoid a recession and a meaningful jump in unemployment as the economy cools and inflation slows.

“I’m not seeing anything at this time that is dramatic enough or significant enough, in my view, to significantly change the outlook,” she said, according to a CNN transcript. “The outlook remains one for moderate growth and continued strong labor market with inflation coming down.”

Her comments were more nuanced than remarks she made April 11, when she said she saw no evidence of a credit contraction in the US even after the Fed released data just days prior showing bank lending had significantly dropped during the last two weeks in March.

Yellen was asked whether the US would support calls made to use frozen Russian assets to help with the reconstruction of Ukraine. The country’s president, Volodymyr Zelenskiy, spoke this week via videoconference to a gathering of global finance leaders in Washington and urged them to seize Russian assets.

The Treasury chief agreed Russia should be forced to contribute but stopped short of endorsing a seizure of assets.

“Russia should pay for the damage that it has done to Ukraine,” she said. “But, you know, there are legal constraints on what we can do with frozen Russian assets, and we’re discussing with our partners what might lie in the future.”