Last week, Yellen warned that the United States could run out of money to meet its financial obligations as early as Jun 1.
On Thursday, she recalled a similar impasse in 2011, which resulted in the United States losing its coveted AAA debt rating.
A high-stakes meeting between Biden and key lawmakers from both parties on Tuesday yielded no breakthrough, but the group agreed to keep trying to avert a default.
But on Wednesday, Trump – a frontrunner for the 2024 Republican presidential nomination – urged otherwise during a live broadcast on CNN.
“Republicans out there, congressmen, senators, if they don’t give you massive cuts, you’re gonna have to do a default,” he said.
When asked about Trump’s comments, Yellen said “America should never default” because “it would be tremendously economically and financially damaging”.
“The notion of defaulting on our debt is something that would so badly undermine the US and global economy that I think it should be regarded by everyone as unthinkable,” she said.
“I’m very hopeful that the differences can be bridged and the debt ceiling will be raised.”