US Treasury Secretary Janet Yellen downplays recession fears | Latest English News | WION

US Treasury Secretary Janet Yellen downplays recession fears | Latest English News | WION

US Treasury Secretary Janet Yellen on Sunday downplayed fears of a possible recession Sunday but admitted an economic slowdown is occurring.

In the united states where amid looming
fears of an economic slowdown u.s
treasury secretary janet yellen is
downplaying the possibility of a
recession in the united states yellen
says growing consumer spending
industrial output credit quality and
other economic indicators do not suggest
that the economy is recessionary but she
added that america’s inflation is way
too high and straining the country’s
economic system
yellen made the comments in a tv
interview days before the u.s is due to
release a trove of economic numbers that
may fuel the notion that the country is
in fact entering a recession the data
will detail factors including new home
sales consumer confidence plus incomes
spending inflation and overall output
data
ahead of the thursday release some
economists expect the us economy to
demonstrate further contraction and if
the numbers indeed show a second
consecutive quarter of negative growth
well that is the informal definition of
a recession the us economy shrank by 1.6
percent in the first quarter of this
year two straight negative readings are
usually considered a hallmark of a
country entering recession although in
this case some economists and the biden
white house think the numbers may be
misleading
yellen highlighted america’s
unemployment figures in her comment in
her comments unemployment stands at 3.6
percent that’s nearly a half century low
she said the u.s remains a very strong
labor market but she acknowledged that
the american economy is in a
transitional period in which growth is
slowing she said the slowdown is
necessary and appropriate if the economy
is to grow at a steady and sustainable
pace slower growth could help bring down
inflation america’s june inflation
numbers stood at 9.1 percent year on
year that’s the highest in four decades
for more on all of this we’re being
joined by economic advisor and strategy
consultant uh jamie martinez and he is
in the spanish capital of madrid mr
martinez uh thanks very much indeed for
joining us uh today
i mean there’s going to be a bit of an
argument here in the united states this
week isn’t there if indeed uh a second
consecutive quarter of negative growth
is notched up uh because under normal
traditional circumstances uh investors
and economists would recognize that as
the start of a recession
yes good morning thank you very much for
having me here
exactly although we are facing a context
with high uncertainty economic data and
expectations that there is a very high
likelihood of recession for the united
states economy in the second quarter of
this year
let’s remember that the u.s gdp has a
downturn of 1.5 percent in the first
quarter then if there is another
downturn in the second quarter we can
talk of a technical recession right and
this scenario is a consequence of the
new monetary policy addressed by the
federal reserve in order to face the the
high inflation which now is nine point
percent in the united states the highest
in four decades
and indeed after more one decade of
expansive monetary policies with the
main instruments of zero or interest or
negative interest rates and the famous
quantitative easings programs
to maintain accredited panic to the
system the inflation has finally arisen
with a strength during the last year
that is why the federal reserve after
months of inaction now now is answering
with a very restrictive monetary policy
from april till now interest rates in
the united states have increased from
0.5 percent to current 175 percent and
with expectations of further increases
in the coming quarters
so so mr martinez you seem to be
embracing the argument uh that has been
advanced today in the wall street
journal uh by senator elizabeth warren
of massachusetts who says the fed’s
aggressive interest rate hikes risk
triggering a recession
but there are voices here in the united
states who say well hang on a second i
mean it was treasury secretary janet
yellen and president biden who waved
away concerns about an inflationary
spiral uh when uh they uh were voiced by
people like former treasury secretary
larry summers and there are many voices
here who say well the fed is now left
dealing with a mess that essentially the
biden administration created by flushing
so much public money uh into public
spending projects through america’s
economic system
yes i totally agree with that diagnosis
actually we always economists know that
inflation is always a monetary
phenomenon and in this case as usual
this high inflation is has been caused
by
one decade of a very expensive monetary
policy which led to higher
public
spending by the government of course in
the united states but also in europe and
in other countries of the world and for
me this is the main origin of the high
inflation always
low monitor a very low interest rates
policy and high
public spending and for that
i’m not surprised about janet challen’s
comments as i mean she was a she’s the
former federal reserve president and she
knows very well this phenomenon of
inflation and she knows that the federal
reserve must act now with strength maybe
this
recession will not bring a higher
unemployment rate as other recessions
have produced in the recent history but
maybe this is because of another effect
that we should consider we can mention
the great resignation phenomena during
the
last year with the pandemic
and that is why
i don’t think it’s that it is very
responsible try in trying to hide or
make up the recession because of course
recession is going to happen very
probably in the united states in this
year and this is going to have a high
impact worldwide not only in europe but
also in india because we must remember
that the united states is one of the
greatest consumers worldwide in the
global demand
so so at the end of the day are you
saying it actually doesn’t matter what
this is labeled i mean the real issue is
to treat the problems that are besetting
uh the american economy rather than have
the debate about whether it is or is not
recessionary
yes i think um
far from trying to affect which is the
now the classic definition of recession
the great problem now here is inflation
inflation is the worst problem now and
we have to face it not only in the
united states it’s a global phenomenon
now which by the way it isn’t it’s not
it’s not caused by by the war of ukraine
many economists have been arguing that
but of course we know in the united
states for example inflation began
significant to rise during the last year
in march of the year 2021 so that’s why
we cannot um
say this is a consequence of the war in
ukraine is again a consequence of these
expansive monetary policies and the
higher
of
of the public spending by the by all
governments in the world so that’s why i
think the main challenge now is to act
against inflation the federal reserve
has been
late answering to this
problem as well
here in europe with the european central
bank which now finally last last week
the european central bank announced
a rise in the entrance in the interest
rates so
that’s why i think
all the main central banks although they
have been
acting very late now they must respond
with uh more strength so that’s what we
can expect
expect now uh a recession during maybe
in the last of this year or in the
in the new year
but
in the whole world
challenges the world over jamie martinez
economic advisor and strategic
consultant joining us today from madrid
in spain thank you very much indeed uh
for your insights on that

 

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