The current US Treasury Secretary and former Federal Reserve Chairman Yellen stated on Monday that high interest rates in the United States may continue, but it is currently unclear. Yellen also insists that the US economy is in good condition.
Yellen's statement about US interest rates is somewhat different from her public statement in early October. At that time, she stated that the scenario of US interest rates staying at higher levels for a longer period of time was "definitely not inevitable". The unexpected resilience of the US economy has led investors to question how inflation can be reduced, but she is skeptical that this macro context will force interest rates to remain high for the long term.
The rapid rise in US bond yields in recent months has been a hot topic in the market. On Monday, after the conflict between Palestine and Israel temporarily led funds to seek refuge in US bonds, US bonds resumed their decline, and the yield of 7-30 year US bonds rose by at least 8 basis points on that day.
Yellen's expression of optimism about the US economy is similar to before. She has repeatedly publicly stated that she believes that the baseline scenario for the United States is a so-called soft landing, where inflation decreases but unemployment does not significantly increase.
As of September 30 of this year, the size of the US federal "public held debt" was $26.3 trillion, accounting for approximately 98% of the estimated GDP. Yellen recently pointed out that the interest expenditure on US treasury bond bonds is still controllable. The financial situation of the United States is by no means insurmountable, but vigilance must be maintained in this regard.
Regarding the recent market attention to the situation between Palestine and Israel, Yellen stated that while Israel is fighting Hamas militants, the United States is absolutely capable of providing new assistance to Israel, while continuing to provide significant assistance to Ukraine. Of course, Americans have the ability to stand with Israel and support Israel's military needs. We can and must also support Ukraine against Russia
Yellen believes it is too early to make predictions about whether the Israeli-Palestinian conflict will plunge the global economy into recession. We are studying the impact of conflicts on the economy. I think it is too early to speculate whether there will be significant consequences. I think what is important is that it depends on whether the hostilities extend beyond Israel and Gaza, which is of course the outcome we want to avoid
Last week, Yellen acknowledged that the current round of Palestinian-Israeli conflict has brought additional concerns, but she stated that she has not yet discovered any serious economic impact caused by the conflict.
On the same day, news showed that European Central Bank President Lagarde told eurozone finance ministers in a closed meeting of EU officials that the European Central Bank is monitoring oil prices to assess the impact of the Israeli-Palestinian conflict on inflation. Lagarde stated that the risk of rising oil prices will simultaneously impact Europe and the United States. Yellen also attended the meeting.
The European Central Bank's inflation forecast for September is that the growth of the consumer price index is expected to slow to 2% in 2025, assuming that the oil price of $82.7 per barrel is expected to drop to $77.9 by 2025 this year. Analysts predict that the escalation of the Israeli-Palestinian conflict may push oil prices to $100 per barrel.