A recession in the United States is not “inevitable” but the economy should slow down, Treasury Secretary Janet Yellen said on Sunday, days after the United States Federal Reserve raised interest rates, raising fears of a contraction .
“I expect the economy to slow down” as it transitions to steady growth, she said on ABC’s “This Week,” but “I don’t think a recession is due. all inevitable”.
The U.S. economy has recovered strongly from the damage caused by Covid-19, but soaring inflation and war-aggravated supply chain problems in Ukraine have heightened pessimism.
Shares on Wall Street fell after the U.S. central bank, seeking to calm inflation, raised the benchmark borrowing rate by 0.75 percentage points on Wednesday, the biggest rise in nearly 30 years.
And economists are seeing worrying signs of weakening consumer confidence, with services spending the hardest hit.
People are starting to delay vacation plans — domestic flight bookings fell 2.3% last month, Adobe Analytics reported — and are cutting back on restaurant visits, haircuts and home repairs.
Inflation “at an unacceptable level”
Yellen conceded that “clearly inflation is at an unacceptable level”, attributing it in part to the war in Ukraine, which has driven up energy and food prices.
But she said she did not believe “that a decline in consumer spending is the likely cause of a recession”.
The U.S. labor market is “arguably the strongest in the post-war period,” Yellen said, and she predicted a slowdown in inflation in the months ahead.
For Fed Chairman Jerome Powell – who succeeded Yellen in the role – controlling inflation without weakening the labor market will take “skill and luck”, she said, before add, “but I believe it is possible”.
The US economy contracted 1.5% in the first quarter of this year, its first decline since 2020, and early indications point to a continued slowdown in key sectors such as manufacturing, real estate and retail sales. detail.
A recent Conference Board survey of 750 business leaders found that 76% believed a recession was looming or had already begun.
A recent analysis by the nonprofit business group predicted a period of “stagflation” – stagnant growth coupled with inflation – in 2023.
Economist Larry Summers, who served as Treasury secretary from 1999 to 2001, said a wide range of indicators – market volatility, interest rates and inflation among them – point to a recession in the future. ‘horizon.
“All of this tells me that … the prevailing probability would be that by the end of next year, we would see a recession in the American economy,” Summers told NBC’s “Meet the Press.”
“Pain” at the pump
For now, Americans are trying to cope with historically strong price increases. The cost of gasoline at the pump, now around $5 a gallon, has roughly doubled in just two years.
Yellen was asked about the proposals to temporarily suspend federal gasoline taxes and expressed openness.
US President Joe Biden “wants to do everything he can to help consumers,” she said. “And it’s an idea that’s definitely worth considering.”
The White House recently confirmed that Biden will visit oil-producing Saudi Arabia on a trip to the Middle East next month.
The president is “very concerned about what people are going through at the pumps,” Energy Secretary Jennifer Granholm told CNN on Sunday.
“Saudi Arabia is the head of OPEC and we need to increase production so that ordinary American citizens don’t feel this pain that they are feeling.”
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)