Yellen: Inflation ‘definitely’ down next year, U.S. economy won’t fall into recession
[文/观察者网 周弋博]
On September 21, local time, the Federal Reserve announced to raise interest rates by 75 basis points to deal with soaring inflation, raising concerns about rising unemployment and a recession in the United States. Former US Treasury Secretary Lawrence Summers even commented that the unemployment rate will first increase to 5% before the US inflation rate falls to 2.5% within 6 months.
According to Bloomberg News, on September 22, U.S. Treasury Secretary Yellen mentioned the matter in an interview, saying that domestic inflation “certainly” will decline next year, and will not significantly increase unemployment and reduce inflation ” “The road” exists, so unemployment doesn’t increase significantly.
Yellen insisted that although the U.S. labor market is in the “tightest in history”, she believes that the current “lowest unemployment rate in history” can still be maintained and the U.S. economy will not fall into recession.
Screenshot of Bloomberg report
According to reports, on the 22nd, Yellen participated in an interview organized by the American magazine “The Atlantic” in Washington, D.C., to discuss the future economic situation of the United States.
At the beginning of the interview, Yellen clearly admitted that the inflation problem in the United States has been “very difficult”. “First of all, I want to say that I think the inflation rate (in the United States) has been at an unacceptably high level.”
“This is a big problem for every American family, and it creates a huge, financial insecurity for Americans.”
Yellen believes that the reasons for high inflation are varied, including supply chain shortages caused by the new crown epidemic, and the outbreak of the Russian-Ukrainian conflict, but the Biden administration and the Federal Reserve are working to solve the problem.
According to previous reports from Observer.com, on September 21, the Federal Reserve ended its two-day monetary policy meeting and announced that it would raise the target range of the federal funds rate by 75 basis points to between 3% and 3.25%, the highest level since 2008. The highest level of the federal funds rate since the global financial crisis.
Federal Reserve Chairman Jerome Powell acknowledged that such a rapid tightening of monetary policy could bring “pain” to the U.S. economy, including rising unemployment and a correction in the housing market. He admitted that the current level of inflation is not as low as the Fed expected, and it is very difficult to achieve the “soft landing” goal of reducing the inflation rate to 2% while maintaining a strong domestic labor market.
On September 21, after the Federal Reserve announced a 75 basis point interest rate hike, Powell held a press conference Source: The Paper
In an interview on the 22nd, Yellen also directly admitted that the US labor market is in the “most tense in history”, but the US economy will not fall into recession because of this.
“A full-blown recession is a period when unemployment is too high,” Yellen said. “I believe we can continue to have what most Americans consider an ‘all-time low unemployment’ and a strong labor market where people can find work. “
Later, Ron Brownstein, senior editor of The Atlantic, asked Yellen whether domestic inflation in the United States could be brought under control by the end of next year, and whether it would become one of the campaign themes in the 2024 U.S. election.
“I believe (inflation) will come down, and certainly next year,” Yellen replied. “But to be clear, there are risks.”
Yellen said it was still cautious to declare an end to inflationary pressures given the lingering risk of a lingering conflict between Russia and Ukraine.
“Maybe we can get through next year, but I’m sure that inflation will come down.” Yellen said that there is a “road” to reduce inflation without significantly increasing unemployment. “I’m very much looking forward to the success of the Fed.”
On September 22, Yellen participated in an interview organized by The Atlantic Monthly in Washington, D.C. Source: Bloomberg
According to the latest quarterly economic forecast released by the Federal Reserve on the 21st, the median forecast by Fed officials for the economic growth rate from the fourth quarter of last year to the fourth quarter of this year is 0.2%, which is significantly lower than the 1.7% forecast in June, reflecting their view on the U.S. economy. The outlook is more pessimistic.
The median forecast by Fed officials for the U.S. unemployment rate in the fourth quarter of 2023 is 4.4 percent, up 0.5 percentage points from the June forecast, the forecast showed.
On the same day, former U.S. Treasury Secretary Lawrence Summers commented on the Fed’s interest rate hike on Twitter, saying, “I’d be happy to take a gamble with anyone: Before we see inflation falling to 2.5% in 6 months, we will First see the unemployment rate soaring to 5%.”
In this regard, Yellen also responded in an interview on the 22nd. She believes that there is a “road” that does not significantly increase unemployment and reduce inflation. Fed officials may need to ease some labor market pressures, but the unemployment rate does not necessarily rise to 5%. “I am very much looking forward to the success of the Fed. .”
However, Reuters previously reported that recent inflation data showed little improvement, despite the Federal Reserve’s aggressive tightening measures, announcing 75 basis points of interest rate hikes in both June and July, and a strong labor market. Wages are also rising.
The report predicts that in the remaining two monetary policy meetings this year, the Associated Press may also raise interest rates by 1.25 percentage points (125 basis points), which means that the Fed will raise interest rates by another 75 basis points. The new forecast shows the federal funds rate rising to a range of 4.25% to 4.50% by the end of this year and to a range of 4.50% to 4.75% by the end of 2023.
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