Janet Yellen, the US Treasury Secretary, confirmed that her country faces the risk of an economic recession.
According to Arabiya Net, Yellen said the fight against inflation may slow the country's economy, but a dangerous recession can still be avoided.
She pointed out that the stagnation of the US economy is a danger when the Fed tightens monetary policy to counter inflation.
So it's definitely a risk we're watching, Yellen added. But we have a very strong labor market, and I think it can be maintained.
And she continued: The labor market remains very tense with a significant shortage of labor, as the unemployment rate rose somewhat in August.
She pointed out that she is still optimistic that the US economy will be able to overcome the economic recession.
Yellen explained in an interview with CNN that the Fed will need a lot of skill and some good luck as well to achieve what we sometimes call a smooth landing.
I hope we will reach a smooth landing, she said, but Americans understand the need to reduce inflation, and in the long run... we can't have a strong labor market without controlling inflation.
As the world's GDP declined in the first two quarters of 2022, in line with the classic definition of deflation, Yellen reiterated that this is not the case.
Faced with high inflation - which reached a 40-year high in June at 9.1%, before declining slightly in July - the central bank is gradually raising its key rates in order to ease inflationary pressures, while hoping the move will not derail the world's largest economy. off course.
Commercial banks use the Federal Reserve's key interest rates to set the interest rate terms that they offer to their individual and corporate customers, and higher rates reduce consumption and investment.
