Janet Yellen says the US will likely avoid a recession.
Treasury Secretary Janet L. Yellen said on Thursday that she expected the US economy to slow as the Federal Reserve raised interest rates to keep inflation under control, but she didn’t. did not anticipate a recession.
Speaking at The Times’ DealBook DC policy forum, Ms Yellen said the global economy faced a range of serious threats and gasoline prices were unlikely to fall in the near term. However, she said the U.S. economy remains strong despite rising prices, and a strong labor market and solid household finances should be able to continue propelling consumer spending.
“There is no suggestion that a recession is underway,” Ms Yellen said.
Ms Yellen faced criticism this month after acknowledging she had been wrong about the path inflation would take over the past year, when she – along with many other economists – initially described the prize gains as “transient”. The Treasury Secretary also faced questions about whether President Biden’s $1.9 trillion stimulus package was responsible for fueling inflation.
Ms Yellen said on Thursday she did not regret the scale of the aid, known as the US bailout, given the gloomy economic forecasts at the time of its passage in March 2021.
“I wouldn’t do it any differently,” Ms Yellen said, noting that forecasters were anticipating high unemployment for an extended period. “I was very supportive of the US bailout.”
Although Ms. Yellen expressed optimism about the ability of the United States to avoid a recession, the economy faces serious headwinds, including the war in Ukraine, rising energy prices and continued Covid lockdowns in China. It will be up to the Fed, she added, to achieve a so-called soft landing where it raises borrowing costs enough to reduce demand and tame price gains without causing a recession.
“It’s an art,” Ms. Yellen said of the Fed’s work.
The Treasury Secretary added that she expected economic growth in the United States to be slower than last year’s rapid rebound clip, but said she saw a way to curb demand without causing a deep contraction: “We want to move to stable and strong growth.”
Ms Yellen dismissed the view of some Democrats that corporate greed is to blame for rising prices, suggesting she sees it more as a matter of supply and demand. She also suggested that opening a pathway for more immigration to the United States could help dampen rising prices by alleviating the labor shortage in the country.
“Immigration has been very low,” Ms Yellen said. “Increasing labor supply would certainly be a way to ease some of the tightness in the labor market.”
However, Ms Yellen acknowledged that views on the economy are heavily influenced by inflation and petrol prices. This week, the national average hit $5 a gallon, and Ms Yellen did not say if help was on the way.
“Gas prices are unlikely to fall any time soon,” she said.