Janet Yellen Doesn’t Dismiss Recession Possibility; Cites Concerns Over High Inflation

**Yellen Warns of Possible US Recession Amid Concerns over Inflation**

Treasury Secretary Janet Yellen has acknowledged the possibility of a US recession, stating that it is normal for economic growth to moderate and pointing out that inflation remains a significant concern. In an interview with CBS’s “Face the Nation,” Yellen emphasized that while the risk of recession is not entirely off the table, the economy is still in good shape, with a strong labor market and the hope of bringing inflation down. This article explores Yellen’s statements and the current state of the US economy, including inflation worries and the potential for interest rate hikes.

**Inflation Remains a Concern**

Yellen noted that inflation continues to be a concern and acknowledged that it needs to be brought down over time. While the Federal Reserve expects inflation to moderate, a key measure of underlying price pressures is still running at an uncomfortable pace. The consumer price index is forecasted to show a 3.1% increase from a year ago, which would be the smallest annual rate since March 2021. However, when volatile energy and food costs are removed, the core consumer price index is expected to rise by 5% from a year ago, double the Federal Reserve’s goal based on a different inflation metric.

**Federal Reserve’s Response**

To combat inflation, the Federal Reserve has been considering resuming interest-rate hikes. Fed Bank of Chicago President Austan Goolsbee stated that policymakers are on a “golden path” to ease price growth without triggering a recession. While the labor market remains strong, the increase in non-farm payrolls last month was lower than expected, and the job gains from the previous two months were revised downward. The unemployment rate fell to 3.6%, while average hourly earnings rose by 4.4% from a year earlier. Goolsbee mentioned that one or two more rate hikes could be expected this year, with the next policy decision scheduled for July 26.

**Yellen’s Visit to Beijing**

Yellen recently visited Beijing, where she held talks with her Chinese counterparts to address the escalating tensions between the US and China. These tensions have led to a trade war and increased restrictions on crucial technologies like chips. Yellen described the discussions as helping to improve bilateral relations and bring them to a “surer footing.” When questioned about potential controls on outbound investments, Yellen assured that any additional controls would be narrowly targeted and would not significantly impact bilateral investments with China. She also raised concerns about China’s recent move to restrict the exports of metals essential to the chipmaking industry and reopened channels of communication to address these concerns.

In conclusion, Treasury Secretary Janet Yellen has acknowledged the possibility of a US recession while emphasizing the strength of the economy and the need to address inflation concerns. The Federal Reserve is considering interest-rate hikes to combat inflation, and Yellen’s visit to Beijing aimed to improve bilateral relations and address tensions with China. As the US economy navigates these challenges, it remains to be seen how inflation will be brought down and whether a recession can be avoided.

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