On Sunday, Janet Yellen, the secretary of the Treasury, acknowledged that the Biden administration faces a “risk” in the form of an impending recession and rising gas costs.
It is a sharp change from recent months, when the economy was extolled despite mounting worries from experts, politicians, and decades-high inflation.
Progressive Massachusetts Sen. Elizabeth Warren has often warned that the US would enter a recession as a result of interest rate rises implemented by Federal Reserve Chairman Jerome Powell to reduce spending.
When asked whether she shared Warren’s worries, Yellen said on CNN’s State of the Union, “Of course it’s a problem.”
To accomplish what we often refer to as a “soft landing,” which is bringing inflation down while retaining the vigor of the labor market, the Fed will require considerable skill as well as some good fortune.
Biden officials have hastened to highlight the record-setting employment market recovery from the depths of the COVID-19 outbreak as a bright spot in an otherwise bleak economic outlook.
Additionally, Yellen cautioned on Sunday that other aspects of the economy that have improved recently, like as falling gas costs, might revert to hurting Americans’ wallets.
‘It’s a risk, and it’s a risk that we’re working on the price cap to try to address,’ Yellen said.
Treasury Secretary Janet Yellen struck a markedly more cautious tone when discussing the economy on Sunday than she did in recent months
She predicted the effects that the ongoing Russian invasion of Ukraine have on the global energy supply could be exacerbated in the coming months, as the weather gets colder and Europe braces for a lower dependence on Moscow’s vast oil and gas sector.
‘This winter, the European Union will cease, for the most part, buying Russian oil. And in addition, they will ban the provision of services that enable Russia to ship oil by tanker,’ Yellen explained. ‘It is possible that that could cause a spike in oil prices.’
‘Our price cap proposal is designed to both lower Russian revenues that they use to support their economy and fight this illegal war while also maintaining Russian oil supplies that will help to hold down global oil prices.’
She’s on a multi-state tour promoting President Joe Biden’s economic and legislative accomplishments ahead of the November midterm elections
US gas prices average at roughly $3.72 per gallon nationwide, a sharp decline from the all-time high $5 per gallon price seen in June.
Yellen’s interview comes in the middle of her multi-state tour touting President Joe Biden’s economic and legislative accomplishments in time for the November midterms.
She still maintains that the country is not currently in a recession and remained optimistic stating that there was a path to avoiding one.
The Biden official also seemed to agree Sunday with Warren that it would be triggered by the Fed’s bold interest hikes.
The economic body’s aggressive interest rate increases are a controversial strategy for dampening out-of-control consumer prices.
Powell reaffirmed support for the strategy amid reports that he was looking at raising rates yet again later this month.
‘It is very much our view, and my view, that we need to act now, forthrightly, strongly, as we have been doing, Powell said at the Cato Institute’s 40th Annual Monetary Conference on Thursday.
She also admitted that the Federal Reserve was taking a ‘risk’ with its strategy of raising interest rates to fight inflation – after Fed Chairman Jerome Powell (pictured August 26, 2022) signaled his support for doing so yet again
It’s prompted comparisons to the last time inflation was near the most recently seen 8.5 percent level, the 1980s, when the Federal Reserve jacked up interest rates in a bid to slow double-digit inflation and plunged the country into a recession in the process.
Yellen conceded Sunday that recession was a ‘risk’ when ‘the Fed is tightening monetary policy to address inflation. So it’s certainly a risk that we’re monitoring.’
She refused to say whether she was for or against the strategy.
‘I want the Fed to use their own best judgment. They’re independent and they have a great expertise, proficiency in evaluating what it’s going to take to bring inflation down,’ Yellen said when asked if she supported the interest rate hikes.
‘And we’re going to leave them to use their own independent best judgment to try to accomplish that.’
She added, ‘I believe our goals are very well aligned. We want to see a strong labor market and inflation coming down to more normal levels.’