NEW YORK: The United States is unlikely to suffer an economic downturn, despite sky-high inflation, US Treasury Secretary Janet Yellen said yesterday.
“There’s nothing to suggest that there’s a recession in the works,” she said during an interview at The New York Times’ economic forum.
The US economy has recovered strongly from the Covid-19 damage, but the highest inflation in four decades and supply chain snarls exacerbated by Russia’s invasion of Ukraine are increasing pessimism.
The US Labor Department is set to release the May consumer price index (CPI) report today, and analysts expect the data could potentially show a modest slowdown in the torrid 8.3% annual pace.
The Federal Reserve (Fed) has begun raising interest rates aggressively, with another big hike expected next week, as policymakers attempt to combat inflationary pressures without triggering a recession.
Yellen expressed confidence they will be successful.
“I believe there is a path through this that entails a soft landing,” she said.
But the swiftness of the Fed’s planned moves has increased fears of a recession, generally defined as two consecutive quarters of negative growth.
At the forum, Yellen was asked to respond to rapper Cardi B’s tweet about a possible downturn.
“Is there a recession risk? Of course there’s a recession risk,” the Treasury secretary said. “But is it likely? I don’t think so.”
When asked if she knew who Cardi B was, Yellen quipped: “I don’t have a lot of time for her, but I am alive.”
Fed chair Jerome Powell and President Joe Biden have each sought to assuage recession fears, with Powell saying the US economy is strong enough to weather higher borrowing costs. – AFP