US Treasury Secretary Janet Yellen testifies before the Senate Finance Committee on Capitol Hill in Washington on June 7, 2022 (AFP/Nicholas Kamm)
US Treasury Secretary Janet Yellen said on Sunday that a recession was not “inevitable” in the United States, days after another hike in key rates by the US central bank raised fears of the prospect of an economic contraction. .
“I don’t think a recession is inevitable,” Ms Yellen told ABC News, conceding, however, that she expects “the economy to slow down” as it transitions to “slow and slow growth.” steady”.
The hypothesis of a recession in the United States is gaining momentum after the historic decision on Wednesday by the central bank (Fed) to raise its key rates by three quarters of a point, in an attempt to curb galloping inflation.
“(Fed) Chairman Powell has said his goal is to bring inflation down while maintaining a strong job market. It’s going to take skill and luck, but I believe it’s possible” , the Treasury Secretary said, calling the level of inflation “unacceptable”.
“It’s President Biden’s priority to reduce it,” Yellen said.
The Treasury Secretary pointed to Russia’s war in Ukraine as one of the reasons for these food and fuel price hikes.
The main economic adviser to the White House, Brian Deese, said for his part on Sunday on CBS News that the United States should seek to obtain “stable growth, without erasing all the incredible economic gains” made.
On Wednesday, Fed Chairman Jerome Powell assured that the institution was not trying to “induce a recession”, but to “reduce inflation to 2%”, and to maintain “a solid labor market”.
– “Two years” to curb inflation –
The Fed is now counting on 5.2% inflation this year, when it still anticipated 4.3% at its March meeting. At the same time, it forecasts growth of only 1.7%, against 2.8% previously.
“It will take two years” to bring inflation down to 2%, Cleveland Fed President Loretta Mester said Sunday in an interview with CBS.
She insisted on the need to “moderate demand” so that it is better aligned with supply, but she does not “predict a recession”.
The US economy has already slowed with a 1.5% contraction in GDP in the first quarter, and the slowdown seems to be continuing in certain sectors such as manufacturing, real estate and retail sales.
A survey by the Conference Board institute recently revealed that 76% of the 750 bosses questioned considered either that a recession was looming on the horizon, or that it was already in effect.
Former Secretary of the Treasury between 1999 and 2001, Larry Summers considers for his part that the hypothesis of a recession in the American economy “by the end of next year” is the most “probable”.
“All historical precedents point to a recession,” Bill Clinton’s former cabinet minister told NBC on Sunday.
But current Treasury Secretary Janet Yellen sees reason to hope that a recession does not materialize, thanks in part to consumer spending.
“It’s clear that most consumers – even lower-income households – continue to have savings that can act as a buffer and allow them to keep spending,” she told ABC News.
The minister further argued that the job market was also “very strong”, “probably the strongest” since the end of the Second World War.
– Temporary freeze –
Faced with the concerns of American households, Janet Yellen considered that a temporary freeze on federal taxes on fuels at the pump represents “an idea worth considering”.
On CNN, Energy Minister Jennifer Granholm said on Sunday that such a freeze represented “one of the tools” envisaged to reduce inflation, but that “in the first place”, the government wanted to increase the offer. in fuels – in particular by asking the oil-producing countries to increase their production.
“We know it’s going to be a tough summer,” with the holiday season “just getting started,” the minister said of fuel prices. “We know there will be continued upward pressure on demand,” she added.
Asked about the lifting of customs surcharges imposed on Chinese products under Donald Trump, Janet Yellen also said that the United States was considering modifying some of them.
“The surcharges that we inherited, some of them have no strategic purpose and increase costs for consumers. So we are tweaking some of them to make more sense.”