Reforms should avert future financial crisis
london — Federal Reserve Chair Janet Yellen said that she believes banking regulators have made enough improvements to the financial system that the world will not experience another financial crisis “in our lifetimes.”
Addressing an audience at the British Academy in London on Tuesday, Yellen said the banking reforms put in place in recent years have made the financial system much safer. She said regulators are doing a better job of watching for the type of systemic risks that struck the global economy in 2008, bringing on the worst global downturn in seven decades.
“Would I say there will never, ever be another financial crisis?” Yellen asked. “You know probably that would be going too far, but I do think we are much safer, and I hope that it will not be in our lifetimes and I don’t believe it will be.” One growing concern among some in the financial markets is that some asset prices, such as stocks and housing, are beginning to look a bit overpriced — in the way that they did before the financial crisis struck.
But Yellen said the system is better able to handle any shocks that might occur if investors began dumping assets out of concerns about a future financial threat. “I think we have a strong banking sector that’s well-capitalised and has a lot of liquidity,” she said.
Yellen said the US unemployment rate, which stands at a 16year low of 4.3 per cent, is “below the level that most of my colleagues believe is sustainable in the long run.”
She said that most policymakers believe that as unemployment falls, it will begin pushing up wages and that will result in higher levels of inflation. —