The U.S. economy will likely slow down in the next months, but a recession is not inescapable, according to Treasury Secretary Janet Yellen.
Delaware’s REHOBOTH BEACH (AP) — The U.S. economy will likely slow down in the next months, but a recession is not inescapable, according to Treasury Secretary Janet Yellen.
Even as experts become more concerned about a recession brought on by surging inflation and the Russian invasion of Ukraine, Yellen provided some confidence.
In an interview with ABC’s “This Week,” she also indicated that she was open to the idea of a federal gas tax holiday to help motorists save money at the pump. Since the tax is 18.4 cents per gallon and the average price of fuel is around $5 per gallon, several MPs have proposed the proposal.
When asked if the government is contemplating it, Yellen responded, “That’s a notion that’s worth examining.” President Joe Biden wants “to do anything he possibly can to aid customers,” she continued. Jennifer Granholm, the secretary of energy, concurred that “that’s one of the options” but noted that “part of the difficulty with the gas tax, of course, is that it funds the roads.”
Although Yellen noted that spending habits are shifting as a result of the impact of rising food and energy prices, she stated that overall consumer expenditure in the United States is still solid. Yellen stated that household savings will support expenditure during the coronavirus outbreak.
After peaking at 16.6% in 2020, the highest saving rate on record going back to 1948, and 12.7% in 2021, the national saving rate has already decreased to roughly 6%, below pre-pandemic levels.
I anticipate a slowdown in the economy, Yellen stated. It has been expanding extremely quickly, the economy has rebounded, and full employment has been attained. I don’t believe a recession is necessarily inevitable, but I do anticipate a transition to steady and stable development.
Biden’s confidence in the face of economic challenges was mirrored by Yellen. A recession is “not inevitable,” maintained Biden in an interview with The Associated Press last week, and he argued that the United States is “in a stronger position than any nation in the world to overcome this inflation.”
Former Treasury Secretary Larry Summers disagreed with Biden and Yellen’s prognosis, saying that by the end of next year, “the overriding probability would be that we would be experiencing a recession in the American economy.”
To combat a spike in inflation, the Federal Reserve on Wednesday approved the highest interest rate increase in over 25 years. The action increased the target federal funds rate by 0.75%, bringing it to a range between 1.5% and 1.75%.
A reduction in the Fed’s economic prognosis coincided with the tightening of monetary policy; the economy is now expected to grow at a below-trend rate of 1.7% this year, with unemployment rising to 3.7% by year’s end and continuing to rise to 4.1% through 2024.
Yellen stated that bringing down inflation and maintaining a low unemployment rate will require “talent and luck.”
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