‘Absolutely necessary’ for G20 to condemn war in Ukraine, ending war is key for global economy: Janet Yellen

Leaving a war condemnation out of the communique would be a step back from a statement made by G20 leaders last November, she said
Ending war in Ukraine is the most important thing for global economy, with inflation ‘not yet under control, but it’s come down’, she cautioned

Ukraine war

ReutersandBloomberg

Published: 5:58pm, 25 Feb 2023

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US Treasury Secretary Janet Yellen told Reuters that a strong statement condemning Russia’s war in Ukraine was “absolutely necessary” for a communique from the G20 finance leaders’ meeting in India concluding on Saturday.

Yellen said in an interview that leaving a war condemnation out of the communique would be a step back from a statement made by G20 leaders last November on the Indonesian island of Bali.

Finance leaders of the world’s biggest economies were entangled in differences on Saturday over the war in Ukraine and on resolving the debt burden of distressed developing nations, participants said.

The meeting of finance ministers and central bank chiefs of the G20, hosted by India, was likely to end later in the day without a joint communique because there was no consensus on how to describe the conflict in Ukraine, delegates said.

Yellen (fifth from left) meets Indian and US technology business leaders on the sidelines of the G20 financial conclave on the outskirts of Bangalore on February 25, 2023. Photo: AP

“I think there has to be a statement in the communique condemning Russia’s war. We’ve had it in the past, in Bali and it’s something that I think is absolutely necessary,” Yellen said.

“And I think the G7 is certainly united on that, so it’s something that I would expect and I think is necessary and appropriate.”

Yellen’s comments, however, came as hopes were fading that the group would be able to produce a joint statement in its final hours.

G20 chair India is pressing the meeting to avoid using the word “war” in any communique, G20 officials have told Reuters. India, which holds the current G20 presidency, has kept a largely neutral stance on the war, declining to blame Russia for the invasion, seeking a diplomatic solution and sharply boosting its purchases of Russian oil.

Ukraine tensions flare at G20 meetings as India resists mentioning ‘war’

In Bali, the G20 leaders issued a statement that read: “Most members strongly condemned the war in Ukraine,” signalling that Russia, a member of G20, had opposed the wording.

Yellen also said inflation continues to be a problem even as she reiterated her conviction that there is a path for it to come down while maintaining a strong labour market.

Her comments come after data on Friday showed the Federal Reserve’s preferred inflation gauges unexpectedly accelerated in January and consumer spending surged after a year-end slump, adding pressure on policymakers to keep ratcheting up interest rates.

“Inflation continues to be a problem,” Yellen told Bloomberg News in an interview in Bangalore, India. “The data we’ve seen suggests it’s not yet under control, but it’s come down.”

Yellen signalled her outlook did not change after the latest price reading, especially given month-to-month volatility and the fact that inflation expectations remain well-contained.

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She stuck to her view that a soft landing continued to be possible due to the strength of the labour market and the absence of the kind of stresses for households or the financial sector that have preceded past downturns.

“I do believe that that’s possible and it’s what I hope the economy will experience and I don’t see any clear signs at this point that that possibility is becoming more remote,” Yellen said.

Strong start to 2023

Recent indicators have shown a strong start for the economy in 2023, with job growth, retail sales and service-sector activity all accelerating in January.

The resilient spending and stubborn inflation suggest the Fed’s path to taming prices and demand will be bumpier and longer than data for late 2022 had previously indicated.

Friday’s figures, which showed the personal consumption expenditures price index rose 5.4 per cent from a year earlier in January, underscore the risks of persistently high inflation. Stocks fell on Wall Street and bond yields rose Friday.

Shoppers at Disney Springs at the Walt Disney World Resort in Lake Buena Vista, Florida. Photo: Bloomberg

Resilient consumer spending paired with the exceptional strength of the labour market will make it more difficult for the Fed to get inflation to its 2 per cent goal.

“Probably the supply-demand imbalances in the labour market need to diminish somewhat,” Yellen said.

Yellen’s remarks in India sounded more positive about the state of the world economy than a few months ago.

She said ending the war in Ukraine is the most important thing for the global economy and warned such risks could also affect the outlook at home.

“Some of those same global forces apply to the US, and food, energy prices, impacts of the war,” she said. “But also we’re in the phase of tightening monetary policy to address inflation.”