But in her prepared remarks leading up to the question-and-answer session, Ms Yellen said “inflation in the United States remains way too high,” and the top economic priority for the Biden administration is to contain it.
“It’s important to recognize that we now face serious global headwinds and elevated inflation challenges,” she said. “Growth is slowing globally. And energy and food prices have risen, partly due to (Russian President Vladimir) Putin’s horrific war in Ukraine and the ongoing impact of the pandemic abroad. Climate change continues to devastate communities and exacerbate energy and food shortages in Europe and around the world. Our economy remains resilient, supported by President Biden’s economic plan, but we are very aware of these risks.”
The Treasury market is currently reflecting greater uncertainty about the economic outlook, but trading volumes are resilient and investors are able to transact, Ms Yellen said.
“However, in recent years we have seen some periods of stress in this critical market,” she added. “These episodes underscore the importance of building resilience. Treasury is working with financial regulators to drive reforms that improve the Treasury market’s ability to absorb shocks and disruptions, rather than amplify them.”
Notably, financial regulators are “collaborating to better monitor leverage in private funds and develop policies to reduce the first-mover advantage that could lead to investor runs in money market funds and open-end mutual funds.”
Despite global economic headwinds, US financial markets are functioning effectively, Ms Yellen said.
While there has been “some drop in liquidity in the sense that transactions are a bit more expensive,” Ms Yellen said markets are still “working well, trading volume is large, traders are not having trouble executing trades, and so on.” Although you’re seeing signs of higher costs and a little less liquidity, we don’t have a problem. At this point, they continue to work well.”
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