Recession in US not inevitable: Treasury secretary

A recession in the United States is not "inevitable," Treasury Secretary Janet Yellen has said, just days after the US Federal Reserve hiked interest rates, raising fears of an economic contraction.

"I expect the economy to slow" as it transitions to stable growth, she said on ABC's "This Week" on Sunday, but "I don't think a recession is at all inevitable."

Yellen conceded that "clearly inflation is unacceptably high," attributing it partly to the conflict in Ukraine, which has pushed up energy and food prices.

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But she said she did not believe that "a dropoff in consumer spending is the likely cause of a recession."

Yellen argued that the US labour market is "arguably the strongest of the postwar period" and she predicted that the pace of inflation would slow in the coming months.

She acknowledged, however, that as Fed chair Jerome Powell works to control inflation while preserving labor-market strength, "That's going to take skill and luck."

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Asked about proposals for a temporary suspension in federal gas taxes, Yellen expressed openness.

US President Joe Biden "wants to do anything he possibly can to help consumers," she said. "And that's an idea that's certainly worth considering."

Increasing pessimism

The US economy has recovered strongly from the damage wrought by Covid-19, but soaring inflation and supply-chain snarls exacerbated by the conflict in Ukraine have increased pessimism.

Wall Street stocks tumbled after the US central bank on Wednesday raised the benchmark borrowing rate by 0.75 percentage points, the sharpest rise in nearly 30 years.

And economists see worrying signs that consumer confidence is weakening, with people beginning to hold off on vacation plans, dining out or doing home repairs.