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Treasury Secretary Yellen says recession is ‘not at all inevitable’ – but inflation is ‘unacceptably high’

Topline

Treasury Secretary Janet Yellen said on Sunday that a recession was “not at all inevitable”, although she warned that economic growth could slow, days after the Federal Reserve raised interest rates. interest in fighting inflation and that some pundits wondered if the economy was headed for another recession.

Highlights

Yellen told ABC This week she expects the economy to slow as the labor market recovers from the Covid-19 pandemic, adding “it is natural now that we expect a transition to steady and stable growth.”

Yellen added that “obviously inflation is unacceptably high”, after consumer prices jumped 8.6% year-on-year last month, marking an unexpected high in 40 years. .

Yellen reiterated that tackling inflation is President Joe Biden’s number one priority, and that Federal Reserve Chairman Jerome Powell has said his goal is to bring inflation down while maintaining a stable market. solid work.

Yellen said Powell’s goal would take “skill and luck,” but she doesn’t think a recession will necessarily follow.

Contra

A the wall street journal A survey of economists published on Sunday puts the probability of a recession next year at 44%, an unusually high figure. Prior to the 2008 recession, the Log polled economists who estimated the probability at 38%, and in February 2020 economists assigned a probability of 26%. A survey by the Conference Board’s Business Research Group released on Friday also found that 76.1% of C-suite senior executives believe there is already a recession and 43.3% believe there will be one. recession by the end of the year.

Key context

The Federal Open Markets Committee announced on Wednesday that it will raise the federal funds rate by 0.75 percentage points – the biggest interest rate hike since 1994 – as it battles inflation. Uncertainty around a possible recession came to a head last week when all major stock indexes plunged into bearish territory on Monday and layoffs began at some technology and real estate companies. The Dow Jones Industrial Average is down 18% since the start of this year, and US GDP also fell 1.4% in the first quarter of 2022. Despite the numbers, Biden echoed Yellen’s sentiment on a possible recession in a Thursday interview with the Associated Press, saying a recession is “not inevitable.”

Further reading

‘Worst fears confirmed’ as Fed ‘plays a dangerous game’ with inflation and rising rates (Forbes)

The Fed allows the biggest interest rate hike in 28 years, as experts fear its fight against inflation could trigger a recession (Forbes)

Most CEOs Expect Recession Next Year, Poll Shows (Forbes)


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Post expires at 2:02am on Friday July 1st, 2022