there is a “risk” of recession, warns the treasury secretary

there is a “risk” of recession, warns the treasury secretary

there is a “risk” of recession, warns the treasury secretary

Faced with inflation which reached its highest level in 40 years in June, and then slowed down slightly in July (8.5%), the central bank is gradually raising its reference rates.

There are “a riskof recession in the United States due to the measures adopted to slow down inflation, which will necessarily weigh on economic activity, but it is possible to avoid it, US Treasury Secretary Janet Yellen said on Sunday 11 September.

A recession in the United States is “a risk when the Fed, the US central bank, tightens its monetary policy in the face of inflation“Joe Biden’s Minister of Economy and Finance told CNN. “It is therefore obviously a risk that we are monitoringhe added, but we have a strong labor market and I believe it is possible to keep it that way“.

Faced with inflation which in June had reached the highest level of the last 40 years, and then slowed down slightly in July (8.5%), the central bank is gradually raising its reference rates to slow down economic activity and ease the pressure on prices.

“Soft landing”

These policy rates set the tone for commercial banks for the loan interest rates they offer to their retail and corporate clients. Higher rates therefore mechanically reduce consumption and investments. “Inflation is too high and it is essential to reduce it“, Hammered Janet Yellen.

The Fed hopes for asoft landing», Or to bring inflation back to the target of 2%, without plunging the economy into recession, which would cause a surge in unemployment. “I believe there is a way to get there. In the long run, we cannot have a strong labor market without inflation under control“Said the minister.

While the GDP of the world’s largest economy contracted in the first two quarters of 2022, fitting the classic definition of a recession, it once again stated that this was not the case. “We are not in a recession. The labor market is exceptionally strong. (…) There are nearly two vacancies for every worker looking for a job“, Assured Janet Yellen.

The labor market remains very tense with a severe labor shortage. The unemployment rate, however, rose slightly in August, to 3.7%, particularly with the increase in the participation rate, a sign that many workers left by the roadside due to Covid are returning to the market.

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