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In conversation with CBS 60 minutesUS Treasury Secretary Janet Yellen expressed optimism about the state of the US economy in the coming year and predicted a significant fall in inflation in 2023. Yellen added that a recession is not necessary to keep prices below gain control.
Inflation refers to sustained increases in the prices of goods and services in an economy over a period of time. It is measured using the Consumer Price Index (CPI), which tracks price changes of common goods and services used in American households. Governments fight to dampen inflation because once it becomes volatile, the overall economy becomes like a puzzle that can collapse if the wrong piece is removed.
In her interview that aired on Sunday, Yellen said she believes “by the end of next year inflation will be much lower if there isn’t an unexpected shock”. She cited some factors that contributed to her cautious optimism, including lower gas prices and faster delivery times.
Yellen also said she hopes the continued inflation “will be short-lived”.
The US “learned many lessons from the high inflation we experienced in the 1970s,” continued Yellen, “and we are all aware that it is critical that inflation is brought under control and not become endemic for our economy.”
The Federal Reserve is likely to make its seventh rate hike on Wednesday. According to CNN, investors expect the rate of increase to slow to half a point. The Fed’s rate hikes have resulted in higher borrowing costs, pushing credit card rates to their highest levels, raising concerns about an impending recession.
Secretary Yellen admitted that a recession is possible, tellingly 60 minutes,”There is a risk of a recession. But it is certainly not something that is needed to bring inflation down in my opinion.”
Eventually, according to Yellen, the economy will move from a period of rapid growth to something more stable. “We recovered very quickly from the pandemic,” Yellen said. “Economic growth was very high. In order to reduce inflation and because almost everyone who wants a job has a job, growth has to slow down.”
