(CNSNews.com) – Treasury Secretary Janet Yellen told ABC’s “This Week with George Stephanopolous” on Sunday that she doesn’t think that a recession is “inevitable.”
“Well, I expect the economy to slow. It’s been growing at a very rapid rate as the economy — as the labor market has recovered and we have reached full employment. It’s natural now that we expect to transition to steady and stable growth, but I don’t think recession is at all inevitable,” she said.
“Chair Powell, clearly inflation is unacceptably high. It’s President Biden’s top priority to bring it down and Chair Powell has said that his goal is to bring inflation down while maintaining a strong labor market. That’s going to take skill and luck, but I believe it’s possible. I don’t think a recession is inevitable,” Yellen said.
When asked if a recession is likely, the secretary said, “Well, I think consumer spending remains very strong, there’s month-to-month volatility, but overall spending is strong although patterns of spending are changing and higher food and energy prices are certainly affecting consumers and making them change their patterns of spending, but bank balances are high.
“It’s clear that most consumers, even lower income households, continue to have buffer stocks of savings that will enable them to maintain spending so I don’t see a drop off in consumer spending as a likely cause of the recession in the months ahead and the labor market is very strong, arguably the strongest of the post-war period,” Yellen said.
“Not only is the unemployment rate near historic lows but there are two job vacancies for every unemployed worker, so the labor market remains extremely strong, unemployment insurance claims near their lowest levels in history,” she said.
“It turns out that you and the president, maybe even the Fed, were too optimistic about inflation last year. Concerned that may be happening again with your suggestion that a recession is not inevitable?” host George Stephanopolous asked.
“Well, inflation is really unacceptably high. Part of the reason is Russia’s war on Ukraine has boosted energy and food prices in the United States and globally. It’s important to recognize that the United States is certainly not the only advanced economy suffering from high inflation. We see it in the UK, we see it in France, Germany, Italy, and the causes of it are global, not local,” Yellen said.
“Supply chain snarls partly resulting from lockdowns in China are also boosting inflation, and so, these factors are unlikely to diminish immediately but over time I certainly expect inflation to come down and I think it’s possible to have that happen in the context of a strong labor market maintaining –” she said.
“Well, you expect it to come down but prices are going to go up before they go down, right? Again, most economists expect the inflation rate to move up to around 7 percent by the end of the year. Does that sound about right to you?” Stephanopolous asked.
“Well, we have had high inflation in first half of this year, and that locks in high inflation really for the entire year, but I do expect in the months ahead that the pace of inflation — it’s likely to come down, although remember there are so many uncertainties relating to global developments and we’re united with our allies in certainly wanting to take the steps necessary to address, to, you know, punish Russia for what it’s doing in Ukraine and there are some spillovers to us as well,” Yellen said.
When asked to explain that Europe’s inflation was at four percent while the United States’ was at six percent, Yellen said, “So, you know, energy prices spillover is really half of inflation, food and energy, and there are spillovers because energy is an important input into almost everything in the economy.
“It is true that we’ve had corn inflation over and above that — that is too high, and the Fed will take steps to bring it down and President Biden believes there are other things the administration can do to support what the Fed will do,” the secretary said.
“He’s had historic releases of oil from the Strategic Petroleum Reserve, that even though gas prices are high, they would be higher without those releases,” Yellen said.
“He stands ready to work and is encouraging producers of oil and refined products, gas, to work with him to increase supplies, to bring gas prices and energy prices down, and if Congress will work with him to enact some of the administration’s programs, we can bring down other costs that are burdening households, like prescription drugs, healthcare costs, increase the supply of affordable housing,” she said.
“We clearly have a housing problem in the United States, and we need to address it by building more affordable housing,” the secretary added.
Yellen was asked to respond to the American Petroleum Institute statement saying that the Biden administration’s “misguided policy agenda shifting away from domestic oil and natural gas has compounded inflationary pressures and added headwinds to companies’ daily efforts to meet growing energy needs while reducing emissions.”
I don’t think that the policies are responsible for what’s happening in the oil market. Actually, consumption of gas and fuels are currently at lower levels than pre-pandemic and what’s happened is that production has gone down, refinery capacity has declined in the United States and oil production has declined.
I think that producers were partly caught unaware of the strength of the recovery in the economy and weren’t ready to meet the needs of the economy, high prices should induce them to increase supplies over time, and, look, it’s a medium term matter.
The way in which we can ensure reasonable energy expenses for households is to move to renewables, to address climate change, as a medium term matter. That’s a way to free us from geopolitical movements in oil prices.
As to whether a gas tax holiday is on the table, Yellen said, “President Biden wants to do anything he possibly can to help consumers. Gas prices have risen a great deal and it’s clearly burdening households. So he stands ready to work with Congress and that’s an idea that’s certainly worth considering.”
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