US Treasury Secretary Janet Yellen said that while the US financial system is currently resilient, current conditions are creating conditions that could create risks to system stability.
In response to questions in an interview in New York today, Yellen said that “the current environment is dangerous and volatile” for the global economy, including high energy prices and increased volatility in financial markets, adding that in this environment risks to financial stability can appear.
And Bloomberg News Agency indicated that recent weeks witnessed heavy selling of British Treasuries by investors, which prompted the Bank of England to intervene by buying bonds to support it in the market.
The deterioration of the value of the Japanese currency also led to the intervention of the Japanese authorities by pumping unprecedented amounts of dollars into the exchange market to support the local currency.
For her part, Yellen told the annual meeting of the Federation of Financial Markets and Securities Industry, “As of today, the US financial system is not a source of economic turmoil… While we are still watching emerging risks, our system is still resilient and continues to function well despite the uncertainty” surrounding the global economy as a whole.
Yellen said that trading in US Treasuries, the world’s largest benchmark bond market, is increasing, despite her references to previous waves of pressure on US bonds, noting the ongoing work to improve the performance of the US bond market.
Yellen also pointed out the potential risks that could arise from increasing private loans.
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