Treasury Secretary Janet Yellen on Sunday blamed global factors for Americans’ spiraling purchasing power and declared a recession is “not at all inevitable,” despite a growing consensus the U.S. could soon find out one is already underway.
Appearing on ABC’s “This Week with George Stephanopoulos,” the former Federal Reserve chair acknowledged inflation is at “unacceptably high levels” but said a recession might not be around the corner.
“I expect the economy to slow,” Yellen said. “It’s been growing at a very rapid rate, as the economy, as the labor market, has recovered. We have reached full employment. It’s natural now that we expect a transition to steady and stable growth, but I don’t think a recession is at all inevitable.”
A recession is defined as two consecutive quarters of negative economic growth. Because the U.S. gross domestic product declined at an annualized rate of 1.5% in the first quarter of 2022, whether or not the U.S. is now in a recession will be determined at the end of this month, when the second quarter concludes.
Treasury Sec. Janet Yellen tells @GStephanopoulos that a recession isn't “inevitable," but says inflation is "unacceptably high."
— This Week (@ThisWeekABC) June 19, 2022
The hopeful thought that the U.S. might avoid a recession echoed President Joe Biden’s claim in a Thursday interview with The Associated Press that a recession is “not inevitable.” But top business leaders are increasingly resigned to the possibility the country is already in a recession.
Yellen, like President Biden and current Federal Reserve Chairman Jerome Powell, initially insisted last year that inflation was “transitory” and would soon slow, blamed it on factors beyond the Biden administration’s control. Specifically, Yellen blamed the war in Ukraine, which has affected global supply chains.
She said Americans have enough savings to keep consumer spending high, which could help stave off a recession. She also expressed support for a gasoline tax “holiday,” which would give Americans some relief from ballooning pump prices.
The annual inflation rate in the U.S. jumped to 8.6% in May, the highest monthly increase since December of 1981. Energy prices rose 34.6%, mainly due to a near 50% increase in the cost of gasoline. But food costs also rose 10.1%, the first increase of 10% or more since March 1981, according to tradingeconomics.com. In addition, the U.S. stock market officially entered bear market territory this week, according to The Daily Wire, as the decline breached the 20% benchmark.
In a later appearance on CNN, Energy Secretary Jennifer Granholm also claimed a “recession is not inevitable.”
Surging inflation occurring in concert with a recession is known as “stagflation” and would be a nightmare for American families, much less the Biden administration. Last week, the Federal Reserve moved aggressively to tame inflation by raising the federal funds interest rate by three-quarters of a point, the highest one-time increase since 1994.
Yellen predicted the rate of inflation would come down over the coming months. If it does, it will defy double-digit increases in the producer price index or wholesale inflation. Typically seen as an indicator of retail price increases, it has risen steadily and at a higher pace than the monthly annualized inflation rate.