Treasury Secretary
Janet Yellen
mentioned the U.S. financial system stays robust even if it shrank within the first quarter of this yr, including that each persistently excessive inflation and spillovers from the warfare in Ukraine current financial dangers.
“The outlook is very uncertain. The dangers at the global level are high,” she mentioned. “I do worry about commodity prices, I am worried about spillovers from Russia and Ukraine that can have adverse impacts not just on the U.S. that is strongly positioned, but on Europe, on emerging markets.”
Ms. Yellen spoke just about Wednesday at The Wall Street Journal’s CEO Council Summit in London because the Biden administration grapples with the Russian invasion of Ukraine and the very best inflation in many years. Ms. Yellen has been an architect of the wide-ranging sanctions the U.S. and its allies have positioned on Russia, which included freezing the Russian central financial institution’s international forex reserves.
As the U.S. and the EU have labored intently on lots of the sanctions, Ms. Yellen has additionally raised issues in regards to the newest step the 27-country bloc is proposing to punish Russia: an embargo on imports of Russian oil. She mentioned Wednesday that the transfer may additional elevate oil costs, which did bounce within the aftermath of the EU announcement.
“We need to see the conditions exactly how this is going to be accomplished because it could lead to higher global oil prices as well,” she mentioned. “But the desire to respond to Russia’s unprovoked attack on Ukraine and to bring the war to an end is very understandable and important.”
Valdis Dombrovskis,
the EU’s prime financial and commerce official, mentioned throughout a current go to within the U.S. that the bloc would work intently with the U.S. Treasury on learning the financial impacts of such a transfer. The Ukrainian finance minister mentioned a drastic bounce in oil costs may permit Russia to nonetheless internet an identical degree of income from vitality gross sales after a European embargo.
Throughout their sanctions marketing campaign, the U.S. and its allies have sought to attenuate the blowback on their very own economies—a objective that’s turning into harder because the warfare grinds on and Western allies proceed to extend their penalties on the Russian financial system. Ms. Yellen mentioned the U.S. is contemplating extra punishments, including that the U.S. and its allies may start rolling again sanctions on Russia if it reaches a peace settlement with Ukraine.
The transfer by the U.S. and its allies to freeze Russia’s central financial institution reserves has raised questions in regards to the greenback’s standing because the world’s reserve forex. Some observers have questioned whether or not international locations might shift away from maintaining reserves in {dollars} in the event that they imagine the U.S. and others may later seize them.
Ms. Yellen mentioned Wednesday that the U.S. has solely not often frozen a central financial institution’s reserve belongings, including that no different forex can compete with the greenback’s broad availability.
“We have only rarely, I believe in the case of Iran and North Korea , imposed sanctions on a country’s central bank and the decision to do that to Russia was not one that was undertaken lightly,” she mentioned. “I would point out that it involved a very broad coalition of countries that felt that it was warranted.”
“The bar is not low,” she added.
Much of the remainder of the Biden administration’s coverage agenda has run into headwinds in Congress, together with a worldwide minimal tax settlement that Ms. Yellen has pushed to move into legislation. The EU has additionally not but carried out the settlement.
Ms. Yellen mentioned she expects the EU will transfer ahead with the deal this spring and stays hopeful that Congress will maintain up its finish of the discount within the coming months.
“So I really expect the EU to pass this into law this spring, and I think that would be a good example to the United States to show a very significant piece of the economic activity in the world has come into compliance,” she mentioned.
Write to Andrew Duehren at [email protected]
Corrections & Amplifications
Treasury Secretary Janet Yellen mentioned Wednesday that the U.S. has solely not often frozen a central financial institution’s reserve belongings. An earlier model of this text incorrectly mentioned she made the comment on Tuesday. (Corrected on May 4)
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Appeared within the May 5, 2022, print version as ‘Yellen Notes Risks to U.S. Economy.’
Source: www.wsj.com”