There is 'risk' of recession in the United States, says Treasury Secretary

There is “a risk” of recession in the United States, according to the Secretary of the Treasury

“We are not in a recession. The labor market is exceptionally strong,” said US Treasury Secretary Janet Yellen. (archive)

There is “risk” of a recession in the United States due to measures taken to slow inflation, which will necessarily hurt inflation. economic activity, but it is possible to escape it, US Treasury Secretary Janet Yellen said on Sunday.

A recession in the United States is a risk when the Fed [the American central bank] tightens its monetary policy in the face of inflation, said the head of economics and finances of Joe Biden, on the channel CNN.

So that's obviously a risk we're watching, she added, but we have a strong labor market, and I believe it is possible to keep it that way.

Faced with inflation which had reached its highest level in 40 years in June, before slowing down a little in July (8.5%), the central bank is gradually raising its key rates, in order to slow down economic activity and ease pressure on prices.

US inflation slowed to 8.5% in July.

These key rates set the tone for commercial banks for the loan interest rates they offer to their customers, both individuals and businesses. Higher rates therefore mechanically reduce consumption and investment.

Inflation is far too high and it is essential to reduce it, hammered Janet Yellen.

The Fed hopes for a soft landing, i.e. bringing inflation back to its 2% target, without plunging the economy in the recession, which would cause a surge in unemployment.

I believe there is a way to get there. […] In the longer term, we cannot have a solid labor market without inflation under control, said the minister.

While the GDP of the first world's economy contracted in the first two quarters of 2022, which is the classic definition of a recession, she again asserted that it did not.

We are not in a recession. The labor market is exceptionally strong. […] There are nearly two vacancies for every worker looking for a job, Ms. Yellen said.

The labor market employment remains very tense with a major labor shortage. The unemployment rate, however, rose a little in August, to 3.7%, in part because the participation rate rose, a sign that many workers left on the side of the road by COVID-19 are returning to the job. market.

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