In a recent interview aboard her aircraft returning from the Group of 20 summit in New Delhi, Treasury Secretary Janet Yellen conveyed her increasing optimism regarding the United States’ ability to manage inflation without inflicting significant harm on the job market. Yellen celebrated the latest data indicating a consistent deceleration in inflation, coupled with a notable surge in job seekers. The summit, also attended by President Joe Biden, unfolded amidst a backdrop of favorable economic statistics for the world’s largest economy.*
Headline inflation in the US has notably slowed, approaching the 3% mark, though it still exceeds the Federal Reserve’s desired target of 2%. This slowdown has transpired without any corresponding decline in payrolls or the nation’s Gross Domestic Product (GDP). Secretary Janet Yellen emphasized that “every measure of inflation is on the road down.”
Furthermore, Yellen underscored that while the US unemployment rate did increase in August, it wasn’t due to a significant wave of layoffs. In August, the jobless rate reached 3.8%, owing in part to a rise in the labor force participation rate, which reached its highest level since February 2020, when the COVID-19 pandemic began its global spread.
She hailed the easing of the labor market as a positive development, particularly noting that it stems from more individuals actively seeking employment. Treasury Secretary Janet Yellen expressed confidence in her belief that inflation could return to the Fed’s 2% target without triggering a spike in unemployment, a conviction she has consistently upheld over the past year.
Accompanying this positive trend are sustained gains in consumer spending and indications of stability in the housing market, despite a surge in mortgage rates. As a result, economists have been revising their predictions of an imminent recession in the US. Goldman Sachs Group Inc. economists now estimate just a 15% chance of a recession, down from their previous estimate of 20%.
Contrastingly, China has faced disappointing economic data that cast doubts on the nation’s ability to achieve its target of 5% growth this year. Yellen reiterated her view that Chinese policymakers have room to implement further measures to support their economy. China has made minor adjustments in monetary policy, but they have yet to embark on broad stimulus packages for consumers or substantial interest rate cuts.
Regarding the depreciation of China’s currency against the US dollar, Yellen noted that Beijing’s efforts to stabilize the situation are understandable. She emphasized China’s desire for global confidence in its economy and financial system.
China’s recent endeavor to expand the BRICS group by adding six new members was also discussed. Yellen pointed out that this assembly comprises nations with varying interests. The United States maintains strong alliances with several BRICS-11 nations, including ongoing cooperation with Brazil and South Africa on biofuels. Yellen stressed the importance of G-20 efforts in addressing global challenges such as health, food security, and lending.
In her interview, Yellen lauded the G-20 as the premier forum for global cooperation and highlighted the “extremely strong” relationship with India, which has hosted the G-20 summit and is a BRICS member. The US has been actively engaging with emerging markets, notably deepening its ties with Vietnam, a vital hub for consumer electronics.
Upon their return to the US, Yellen and President Biden face a fiscal showdown as Congress has yet to pass annual federal appropriations bills, potentially leading to a partial government shutdown. Yellen maintained her optimistic outlook on the US fiscal trajectory, despite a widening budget deficit driven partly by rising interest costs.
In the first ten months of the fiscal year, interest payments have totaled a substantial $726 billion. Yellen acknowledged the pressure that higher interest expenses exert on the deficit but emphasized President Biden’s commitment to a fiscally sustainable budget. She concluded by stating that she believes the current fiscal position of the United States is acceptable.
Source: Yahoo finance
