US recession unlikely, says former Federal Reserve chair Janet Yellen says
- Although economic growth in the United States is slowing, it is ‘not a dangerous situation’, she says
- Remarks echo those of Chicago Federal Reserve president Charles Evans, who put the chances of a US recession at no more than 25 per cent
Economic growth in the United States is slowing but it is unlikely to drop to a level that will cause a recession, former US Federal Reserve chair Janet Yellen said in Hong Kong on Monday.
“I don’t see a recession in the US as particularly likely. The US is certainly experiencing a slowing of growth and that is something that was long expected,” Yellen said at a Credit Suisse forum on Asian investment.
The US economy grew by more than 3 per cent last year due to a huge US fiscal stimulus, synchronised global growth and highly accommodative financial conditions. But those factors were not expected to last, Yellen said. The positive impact from the fiscal stimulus has faded substantially, while financial conditions have tightened and the global growth outlook is less strong than it was previously.
“Forecasts from the Fed [policymaking] committee meeting show growth would slow to something close to 2 per cent, which is near to the rate of growth of potential output in the US. That is not a dangerous situation,” Yellen said.
Forecasts from the Fed [policymaking] committee meeting show growth would slow to something close to 2 per cent, which is near to the rate of growth of potential output in the US. That is not a dangerous situation.
Historically, a cause of US recessions has been a financial imbalance that led to an unwinding of a “bubble”, such as happened in the global financial crisis in 2008-09. However, the current financial system does not show any signs that it could be the cause of such a shock, she added.
