With the Federal Reserve taking aggressive action to combat stubbornly high inflation, talk of a recession is mounting and U.S. officials have come out frequently to cool recession fears.
U.S. Treasury Secretary Janet Yellen said in an interview Sunday that the recession many Americans fear is “not at all imminent” or “inevitable.”
Yellen spoke on the program:
“I expect the economy to slow.As the economy and the labor market have recovered and we have reached full employment, it has been growing at a very rapid rate.Now it’s natural to expect steady growth, but I don’t think a recession is inevitable.”
Ms. Yellen did not believe a drop in consumer spending would be the cause of the recession.Consumer spending remains very strong, she said, and higher food and energy prices will certainly affect consumers, but most consumers, even low-income households, still have a cushion of savings that allows them to sustain spending.
In addition, Ms Yellen pointed to the strongest postwar Labour market as a positive.
While Ms Yellen was optimistic that the economy would avoid recession, she was blunt about inflation, which she described as “unacceptably high”.
Fed Chairman Jerome Powell has previously said his goal is to keep inflation down while maintaining a strong labor market.Ms. Yellen said it would take skill and luck, but she believed it was possible.
Ms. Yellen reiterated that the conflict between Russia and Ukraine and supply chain disruptions caused by the pandemic were partly to blame for high inflation, and while those factors would not change immediately, she predicted that the pace of inflation was likely to decline in the coming months.
Ms Yellen also stressed that the US was not the only advanced economy suffering from high inflation, which had been seen in the UK, France, Germany and Italy, and that the causes of inflation were global rather than local.
Cleveland Fed President Loretta Mester, who is on the 2022 ballot, also told reporters on Sunday that she did not expect a U.S. recession.
‘It’s true that the U.S. economy is slowing, and it’s true that unemployment is rising a little bit,’ Mr. Meister said.This is acceptable and the US would like to see demand slow down to bring it in line with supply.
Ms Mester was equally less sanguine about inflation, which she believes will take “a few years” to return to the Fed’s 2 per cent target.