Yellen: The recent reasons for U.S. interest rate cuts have essentially disappeared, raising concerns over inflation and debt risks

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Mars Finance News, June 12 — Former U.S. Treasury Secretary and Federal Reserve Chair Janet Yellen stated at the 2026 Eastern Hemisphere Asset Management Global Investment Forum in Paris that the reasons for the recent rate cuts in the United States "have essentially disappeared," and current inflation and macroeconomic uncertainties are significantly limiting monetary policy space.
Yellen pointed out that the U.S. economy is facing three simultaneous supply-side shocks: price pressures from tariffs, energy disruptions caused by Middle East tensions, and rising electricity costs driven by artificial intelligence investments.
These factors combined are expected to keep inflation above the Federal Reserve's target for some time.
She also warned that the U.S. federal government debt level is underestimated by the market, and the combination of debt burdens and rising interest rates is increasing fiscal vulnerability.
She stated that the U.S. fiscal policy path is "unsustainable," with interest payments exceeding defense spending, and long-term government bond markets may face risk reassessment.
Regarding growth, Yellen believes the labor market remains resilient, but changes in inflation expectations are the key variable for monetary policy.
Although the likelihood of rate hikes in the short term is low, in the current environment, "the reasons for recent rate cuts have disappeared," and the market is readjusting expectations for the interest rate path.
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