As the world’s markets have been gripped in a vice by rising energy costs, the emergence of new Covid-19 strains and Russia’s conflict with Ukraine, Treasury Secretary Janet Yellen stated on Tuesday that the U.S. economy was “doing very well.”
“From the perspective of the United States, I think the United States is doing very well,” Yellen said during a recent interview. During the annual meetings of the World Bank and the IMF last week in Washington, D.C., the Treasury Secretary had discussions with prominent figures in the global financial sector.
She claimed that after a very robust rebound, the economy was expected to slow down, but a recent jobs report released last week showed that the economy was “very resilient.” In September, nonfarm payrolls climbed by 263,000, according to the Bureau of Labor Statistics, while the unemployment rate decreased to 3.5 percent, which is tied for the lowest level since late 1969.
However, the price increase that is approaching its quickest rate in more than 40 years has placed certain restrictions on consumers. According to the most recent New York Fed Survey of Consumer Expectations, people predict the inflation rate to be 5.4 percent a year from now, which would be a decrease from 5.75 percent in August and the lowest amount in a year.
As the central bank implemented a series of rate hikes totalling 3 percentage points, that level reached a peak of 6.8 percent in June and has since been declining. Markets generally anticipate that the Fed will keep raising rates until it achieves its long-term goal of 2% inflation.
Yellen recognised that inflation is out of control and that the Biden administration is focused on bringing it down. However, she asserted that there is a way to achieve it while preserving a robust job market.
“Firms, even with rising interest rates, have debt burdens that are by and large manageable,” Yellen said. She continued by saying that the U.S. financial markets are still operating smoothly and that the Treasury is not observing any evidence of the typical deleveraging that takes place when monetary policy is tightened.
In addition, Yellen stated that although there are no indications that warrant serious worry, the decision by OPEC+ to restrict oil supply and Russia’s ongoing conflict with Ukraine have also had an impact on market liquidity. Concerns about the strength of the dollar are also a normal outcome of the differing rates of monetary tightening in the US and other nations, according to her.
“The dollar is a safe haven, so when times are uncertain, we experience capital inflows into our safe markets,” Yellen said. “And all of those things are pushing up the dollar vis a vis a broad range of countries.”
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