The US banking sector may witness additional consolidation in the near future, according to Janet Yellen, the Secretary of the Treasury. Speaking during an exclusive interview on CNBC, Yellen expressed her belief that certain banks are currently facing earnings pressure, making further consolidation a likely outcome.
Yellen also highlighted potential challenges for banks concerning commercial real estate. She pointed out that higher interest rates and the impact of remote work on office space demand could pose difficulties. Nevertheless, she assured the public that the banking system's capital and liquidity levels remain robust, allowing banks to effectively handle the strain.
When asked about her stance on additional consolidation in the banking industry, Yellen responded, "Certainly in this environment, some banks are experiencing pressure on earnings, and there is a motivation to see some consolidation." She further added, "It wouldn't surprise me to see some of that going forward."
Addressing the topic of inflation, Yellen expressed her confidence in the United States' trajectory towards lower inflation rates while maintaining a strong labor market. She emphasized her expectation of continued progress in the coming two years based on recent data.
Regarding the recent bipartisan agreement to suspend the debt limit, preventing a potential catastrophic default, Yellen described it as a "win for the American people." She also underscored the Federal Reserve's efforts to curb inflation, which are supported by the recent deficit reduction agreement and the decrease in fiscal stimulus following the pandemic.
Looking ahead, the Federal Reserve officials will convene for a two-day policy meeting next week, culminating in a crucial decision regarding the continuation or suspension of the central bank's campaign of interest rate hikes aimed at curbing inflation.
