REHOBOTH BEACH, Delaware (AP) – Treasury Secretary Janet Yellen said Sunday that she expects the U.S. economy to slow in the coming months but that a recession is not inevitable.
Yellen offered a dose of optimism even as economists are growing concerned about a recession fueled by skyrocketing inflation and the Russian invasion of Ukraine.
During an interview on ABC’s This Week, she also opened up about a state gas tax exemption to give motorists some relief at the gas pump. Several lawmakers have floated the idea since the average price of gasoline is around $5 a gallon; The tax is 18.4 cents per gallon.
“It’s an idea that’s certainly worth considering,” Yellen said when asked if the administration was considering it. She added that President Joe Biden wants to “do whatever he can to help consumers.” And Energy Secretary Jennifer Granholm said “it’s one of the tools,” but told CNN’s State of the Union that “of course part of the challenge with the gas tax is that it funds the roads.”
Yellen said overall consumer spending in the United States remains strong, while noting that spending patterns are changing amid the impact of rising food and energy prices. Yellen said household savings during the coronavirus pandemic will help sustain spending.
The national savings rate has fallen to about 6%, below pre-pandemic levels, after hitting 16.6% in 2020, the highest since 1948, and 12.7% in 2021.
“I expect the economy will slow down,” Yellen said. “It has grown very quickly and the economy has recovered and we have reached full employment. We expect a transition to steady and stable growth, but I don’t think a recession is inevitable.”
Yellen reiterated Biden’s optimism amid economic headwinds. Biden insisted in an interview with The Associated Press last week that a recession is “not inevitable,” arguing that the US is “in a stronger position than any other nation in the world to overcome this inflation.”
Former Treasury Secretary Larry Summers disagreed with Biden and Yellen’s assessment, telling NBC’s Meet the Press that in his assessment, “the prevailing probability is that we will see a recession in the American economy by the end of next year. ”
The Federal Reserve on Wednesday approved its biggest rate hike in more than a quarter century in a bid to stem a rise in inflation. The move raised the target overnight interest rate by three-quarters of a percentage point to a range 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 slowing to a below-trend growth rate of 1.7% this year and unemployment rising to 3.7% by the end of this year and beyond will rise to 4.1% by 2024.
Yellen said it takes “skill and luck” to bring inflation down while keeping unemployment low.
“I think it’s possible,” she said.
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