The risks of a recession are rising and it will take “several years” for inflation to return to the US Federal Reserve’s 2 percent target, Loreta Mester, president of the Cleveland Fed, said on Sunday.
“I do not predict a recession,” she said. “The risks of recession are growing, partly because monetary policy could have turned around a little earlier than it was. “Now we are doing it by raising interest rates, but, of course, many other things are happening,” Mester said on the show “Face the Nation” on CBS.
“We are slowing down. . . and that’s okay, we want to see a slowdown in demand to better align with supply. “
Mester said that although monetary policy may target excessive demand in the economy, it will take time for the supply side to “return to better balance”.
“We will not see inflation of 2% immediately, it will take several years, but it will move downwards,” she said.
U.S. Treasury Secretary Janet Yellen acknowledged on Sunday that the economy would slow, but said a recession was not “inevitable.”
“I expect the economy to slow down, it is growing very fast as the labor market has recovered and we have reached full employment,” Jelen told ABC. This week. “We expect a transition to stable and stable growth, but I don’t think a recession is inevitable at all.
The Fed raised its key interest rate by 0.75 percentage points this week, for the first time since 1994.
It has also set the stage for much tighter monetary policy in the near future, with officials predicting rates will rise to 3.8 percent in 2023, with most of those increases planned for this year. They now range between 1.50 percent and 1.75 percent.
On Saturday, Fed Governor Christopher Waller said he would support another 0.75 percentage point interest rate increase at the next central bank meeting in July if, as expected, the data showed that inflation had not eased enough.
Fed President Jay Powell said that his goal is to reduce inflation while maintaining a strong labor market.
“It will require skill and luck, but I believe it is possible,” said Jelen.
Yellen said that although there was monthly volatility in consumer spending, it remained strong overall and did not expect a drop in spending to cause a recession.
“It is clear that most consumers, even lower-income households, still have reserve savings reserves that will allow them to maintain consumption,” said the Treasury Secretary. “I do not see a decline in consumer spending as a likely cause of the recession in the coming months.
The labor market also remained strong, she said, with two jobs for each unemployed worker.
Jelen reiterated the Biden administration’s argument that Russia’s war against Ukraine is partly to blame for high inflation because it raises global food and energy prices. The word in the supply chain due to the closure in China also contributes, she said. Although these factors will not change immediately, she said she expects inflation to fall.
“I expect the rate of inflation to probably decrease in the coming months, although keep in mind that there is so much uncertainty about global development,” she said.
Other senior officials on Sunday reiterated that a recession is not inevitable, although research shows that economists and business leaders expect it next year.
“Where we are at the moment in the economy is transition, and I’ve talked to CEOs over the past week from sectors across the economy and they’re figuring out how to move through the transition,” said Brian Deese, director of the US National Economic Council.
Deese said Biden is working with Congress on legislation to reduce costs for things like prescription drugs and utilities. “The only influential thing we can do right now is work with Congress to pass a law that would reduce the cost of things that families are currently facing,” he said.
The White House also wants the package to include tax reforms that would reduce the deficit and is working with Senate Senate Democrat Chuck Schumer to introduce measures in the coming weeks, Diz said.
Biden also wants to cut gasoline prices, and senior administration officials said on Sunday that the United States is considering a temporary pause regarding the federal gas tax. Jelen said that it was “an idea that is definitely worth considering” and that Biden wants to cooperate with the Congress in order to try to reduce gas prices.
Energy Secretary Jennifer Granholm told CNN that the Biden administration is evaluating a proposal for exemption from gas taxes.
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