Yellen says reforms have made financial system safer

U.S. Fed Chair Janet Yellen speaks during a discussion with Lord Nicholas Stern, President of the British Academy, at Carlton House Terrace of the British Academy in London, Tuesday, June 27, 2017.(AP Photo/Frank Augstein)
U.S. Fed Chair Janet Yellen speaks during a discussion with Lord Nicholas Stern, President of the British Academy, at Carlton House Terrace of the British Academy in London, Tuesday, June 27, 2017.(AP Photo/Frank Augstein)

LONDON (AP) - Federal Reserve Chair Janet Yellen relayed her hope that another repeat of the financial crisis will not occur "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 safer, and that the world should be able to avoid the type of devastating crisis that struck the global economy in 2008.

Yellen said the changes implemented since 2008 have made the "system much safer and much sounder," with banking regulators doing a better job searching for risks to financial stability, especially within unregulated sectors.

While not going so far as ruling another crisis out, she did lay out her hope that the next one "hopefully, it won't be in our lifetimes."

One growing concern among some in the financial markets is 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 - the scenario that effectively pushed the global economy off a cliff in 2008.

"I think we have a strong banking sector that's well capitalized and has a lot of liquidity," she said.

Yellen said the U.S. unemployment rate, which stands at a 16-year low of 4.3 percent, is "below the level that most of my colleagues believe is sustainable in the long run."

Yellen said most policymakers believe that as unemployment falls, it will begin pushing up wages and that will result in higher levels of inflation.

The Fed has hiked its Fed funds rate by a quarter point on three occasions since December, most recently this month, to a range of 1 to 1.25 percent, partly because of this concern.