REHOBOTH BEACH, Del. ( Associated Press) – Finance Minister Janet Yellen said on Sunday that she expects the US economy to slow down in the coming months, but that a recession is not inevitable.
Yellen offered a dose of optimism, even as economists became increasingly concerned about a recession fueled by the height of inflation and the Russian invasion of Ukraine.
She also expressed openness during an interview on ABC’s “This Week,” about a federal gas tax holiday to give motorists some relief at the pump. Several legislators have driven the idea as the average price of gasoline moves around $ 5 per liter; the tax is 18.4 cents per liter.
“This is an idea that is definitely worth considering,” Yellen said when asked if the administration weighed it. She added that President Joe Biden “wants to do anything he possibly can to help consumers.” And Energy Secretary Jennifer Granholm said “it’s one of the tools,” but told Nation World News’s “State of the Union” that “of course part of the challenge with the gas tax is that it finances the roads.”
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Yellen said overall consumer spending in the United States remains strong, noting that spending patterns are changing given the impact of rising food and energy prices. Yellen said household savings during the coronavirus pandemic will help sustain spending.
The national savings rate dropped to about 6%, below pre-pandemic levels, after reaching 16.6% in 2020, the highest on record dating back to 1948, and 12.7% in 2021.
“I expect the economy to slow down,” Yellen said. “It grew at a very fast pace and the economy recovered and we reached full employment. We expect a transition to steady and stable growth, but I do not think a recession is inevitable at all. ”
Yellen echoed Biden’s optimism in the face of economic winds. Biden in an interview with The Associated Press last week insisted that a recession “is not inevitable” and made the case that the US “is in a stronger position than any nation in the world to overcome this inflation. “
Former finance minister Larry Summers disagreed with Biden and Yellen’s assessment and told NBC’s “Meet the Press” that in his estimation, “the overwhelming likelihood would be that by the end of next year” would see a recession in the US economy. ”
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The Federal Reserve on Wednesday approved its largest interest rate hike in more than a quarter of a century to stem a surge in inflation. The move raised the target rate of federal funds by three-quarters of a percentage point to a range of between 1.5% and 1.75%.
The tightening of monetary policy has been accompanied by a downgrade of the Fed’s economic outlook, with the economy now seen to slow to a sub-trend 1.7% growth rate this year, unemployment to end by the end of this year to Rose 3.7% and will continue to rise to 4.1% through 2024.
Yellen said it would take “skill and luck” to bring down inflation while maintaining low unemployment.
“I believe it is possible,” she said.