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Treasury Secretary Janet Yellen said Sunday a recession is not “at all inevitable,” though she warned economic growth could slow, days after the Federal Reserve hiked interest rates to fight inflation and some experts questioned whether the economy is heading into another recession.
Yellen told ABC’s This Week she expects the economy to slow due to the recovery of the labor market from the Covid-19 pandemic, adding “it’s natural now that we expect a transition to steady and stable growth.”
Yellen added that “clearly, inflation is unacceptably high,” after consumer prices jumped 8.6% year-over-year last month, marking an unexpected 40-year high.
Yellen reiterated that combating inflation is President Joe Biden’s number-one priority, and that Federal Reserve Chair Jerome Powell has said his goal is to bring down inflation while maintaining a strong labor market.
Yellen said Powell’s goal will take “skill and luck,” but she doesn’t think a recession will necessarily follow.
A Wall Street Journal survey of economists released Sunday put the probability of a recession in the next year at 44%, an unusually high figure. Prior to the 2008 recession, the Journal surveyed economists who put the probability at 38%, and in February 2020, economists assigned a 26% probability. A Conference Board business research group survey published Friday also found 76.1% of top C-suite executives believe there already is a recession, and 43.3% believe there will be a recession by the end of the year.
The Federal Open Markets Committee announced Wednesday it will raise the federal funds rate by 0.75 percentage points—the largest interest rate hike since 1994—as it battles inflation. Uncertainty around a possible recession reached a fever-pitch last week when all major stock indexes plunged into bear market territory Monday, and layoffs began at some tech and real estate companies. The Dow Jones Industrial Average is down 18% since the beginning of this year, and the U.S. GDP also shrank 1.4% during the first quarter of 2022. Despite the numbers, Biden echoed Yellen’s sentiment on a possible recession in a Thursday interview with the Associated Press, saying a recession is “not inevitable.”
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