(Adds quotes from Treasury official, additional agenda items)
By Andrea Shalal
WASHINGTON, May 5 (Reuters) – U.S. Treasury Secretary Janet Yellen will tell her Group of Seven (G7) counterparts next week that the U.S. banking system remains sound and the global economic outlook is better than it was last autumn, a senior Treasury official said on Friday.
Yellen’s trip to Japan for a meeting of the G7 finance ministers and central bankers was “compressed” to allow her to continue working with Congress to raise the U.S. debt ceiling and avoid an unprecedented default that would be catastrophic for the U.S. economy, the official said.
U.S. President Joe Biden has summoned top congressional leaders to the White House on Tuesday to address the issue. The official said the change in travel plans would allow Yellen to continue engaging on the debt ceiling issue, while also attending the G7 meeting in Niigata from May 11-13.
Yellen will travel to Japan amid renewed pressure on the shares of U.S. regional banks after the collapse of First Republic Bank and the struggles of PacWest Bancorp exacerbated investor worries about the sector. Banking shares rebounded on Friday.
As many as 16 mid-sized banks have shed more than $57 billion in market capitalization since last Friday on renewed fears about the sector’s stability, Reuters calculations showed.
At the same time, the Biden administration remains at odds with Republicans, who now control the U.S. House of Representatives, for their refusal to vote in a higher federal debt ceiling. Biden on Friday sought to appeal to more moderate Republicans to push for an increase in the debt limit and distance themselves from other
Republicans
pushing “draconian” cuts in the budget.
Yellen would remain fully engaged in the talks even during her trip, the official said, adding, “It’s important for her to be at the G7 in part to flag issues that can impact the global economy such as the debt limit.”
The war in Ukraine would be another key topic at the meetings, the official said, along with efforts by G7 countries to build more resilient supply chains, including among low- and middle-income countries, through initiatives like “friendshoring” and the G7’s $600 billion Partnership for Global Infrastructure and Investment (PGII), Treasury said. (Reporting by Andrea Shalal; Editing by Paul Simao)
