Treasury Secretary Janet Yellen said on Thursday she believes the U.S. economy is on the verge of a “soft landing,” as she predicted two years ago when inflation spiked in the wake of the pandemic.
“There was a lot of anxiety about the economy and about the Biden administration's management of the economy,” journalist Ron Brownstein said during a live interview at the 2024 Atlantic Festival, reflecting on their 2022 interview.
“Now, two years later, unemployment is at 4.2, inflation is under 3 percent, and the Fed has finally lowered interest rates,” he said. “I know Taylor Swift has been in the news a lot lately, but let me ask you a question: Are we out of the woods?”
Yellen warned against overconfidence, saying “there are always risks to the economy,” but said the economy is currently showing important signs of a soft landing, as she outlined two years ago.
“When we spoke two years ago, I said I believed there was a path to lower inflation given the strong jobs market, and if the Fed and Administration's policies could achieve that, I would call that a soft landing,” Yellen said.
“And I believe that's exactly what's happening in the economy,” she continued.
The Federal Reserve on Wednesday cut interest rates by 50 basis points for the first time after two and a half years of trying to tame inflation.
The new federal funds rate is between 4.75% and 5%. The Fed gradually raised interest rates from near zero in March 2022 to a range of 5.25% to 5.5% last July as it battled rising inflation, which peaked at 9.1% in June 2022. While the rate hikes have stoked fears of a recession and layoffs, the unemployment rate has remained below 4%, the lowest since the 1960s.
Yellen said she would not comment on the decision to cut interest rates by the Federal Reserve, which she previously chaired, but called the move a “very positive sign for the current state of the U.S. economy.”
Yellen said the labor market remains “robust” despite the significant cooling: “The labor market is not as robust as it was a year and a half or two years ago, when companies were struggling to rehire workers they'd laid off during the pandemic, there was a big shift in demand, and wages were rising rapidly.”
Yellen said she believes it would be a “great outcome” for the U.S. economy to continue on this path.
“Right now, wages are growing faster than the rate of inflation, so workers have a real advantage, but what we're seeing is a normal, healthy labor market,” she added. “We're still seeing positive job growth in the economy, and I believe we can continue on this trajectory, which would be great.”
https://thehill.com/business/economy/4888824-yellen-soft-landing-us-economy/
