Odds of US recession fall, but consumer slowdown may be needed to finish inflation fight, US treasury secretary says
- Resilience in the labour market and falling inflation point to diminishing risk of a US recession, Janet Yellen says
- Yellen and Chinese Premier Li Qiang are both attending an event in Paris on reforming global development lending
US Treasury Secretary Janet Yellen sees diminishing risk for the US to fall into recession, and suggested that a slowdown in consumer spending may be the price to pay for finishing the campaign to contain inflation.
On the chance of a recession, Yellen said “my odds of it, if anything, have gone down – because look at the resilience of the labour market, and inflation is coming down.” She spoke in an interview with Bloomberg News on Thursday.
“I’m not going to say it’s not a risk, because the Fed is tightening policy,” she said, alluding to the Federal Reserve’s 10 interest-rate hikes since March 2022, with potentially more to come.
Yellen’s latest assessment of the US economy follows a May employment report that showed job gains beating all economists’ forecasts. Home construction and retail sales for last month have also shown surprising resilience in the face of the Fed’s aggressive monetary tightening.
“We probably need to see some slowdown in spending in order to get inflation” under control, Yellen said in reference to consumption. The core measure of price increases, which strips out food and energy, “is quite high,” she said.
