Treasury Secretary Janet Yellen reiterated her optimism about the US economy, saying inflation can slow down without a slump in employment, even if growth cools.
(Bloomberg) — Treasury Secretary Janet Yellen reiterated her optimism about the US economy, saying inflation can slow down without a slump in employment, even if growth cools.
“For a year now, we have heard our fair share of predictions about an imminent US recession – with forecasters projecting one by the end of 2022, then by the start of 2023, then by the middle of this year,” Yellen said in remarks due to be delivered Friday in New Orleans. “But our economy has proven more resilient than many had thought.”
The Treasury chief reiterated her longstanding view that “there is a path to reducing inflation while maintaining a healthy labor market,” evein if there are “significant risks ahead.”
Yellen said in an interview last week that she sees diminishing risk for the US to fall into recession, and suggested that a slowdown in consumer spending may be the price to pay for finishing the campaign to contain inflation.
“While there are parts of our economy that are slowing down, households are spending at a robust pace and businesses continue to invest,” Yellen said Friday. “Going forward, I expect the current strength of the labor market and robust household and business balance sheets to serve as a source of economic strength, even if our economy does cool a bit more as inflation falls.”
Federal Reserve officials have raised interest rates by 500 basis points in little more than a year and have signaled more tightening will be needed to rein in an inflation rate that’s running higher than the Fed’s 2% target.
They’ve warned that returning inflation to the goal will likely require a period of below-trend growth and some softening of labor-market conditions.
Yellen touted President Joe Biden’s legislative achievements that stepped up investment in infrastructure, semiconductors and the green-energy transition.
She is the latest administration official to do so, two days after the president delivered what the White House called a “cornerstone” address on his economic policy, “Bidenomics,” with his office seeking to improve perceptions about his job performance before the 2024 election campaign gets into full swing.
Yellen said the policies of Bidenomics are rooted in what she laid out early last year as “modern supply-side economics.”
The idea is to “prioritize investments in our workforce and its productivity – in order to raise the ceiling for what our economy can produce,” Yellen said, highlighting how the Bipartisan Infrastructure Law, CHIPS and Science Act, and Inflation Reduction Act constitute “one of the most important economic investments” the US has made to date.
(Updates with more comment from Yellen in second paragraph.)
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