Treasury Secretary Janet Yellen said a soft landing is possible for the US economy thanks to its strong labor market and the absence of balance sheet problems like the ones that preceded the global financial crisis.
(Bloomberg) — Treasury Secretary Janet Yellen said a soft landing is possible for the US economy thanks to its strong labor market and the absence of balance sheet problems like the ones that preceded the global financial crisis.
Her comments, delivered Friday to reporters at a briefing on the sidelines of the Group of 20 meeting of finance ministers and central bank governors in Bengaluru, India, echo her more positive tone on the global economic outlook outlined a day earlier.
“I see a soft landing as being a possible outcome and the one that I hope we will be able to achieve,” Yellen said. “The economy is fundamentally in good shape, and inflation is coming down if you measure it on a 12-month basis.”
She cautioned that labor markets remained tight and core inflation, the measure that excludes food and energy, remains higher than is consistent with the 2% target, adding that “there’s still work to do to get it down.”
Recent indicators have shown a strong start for the economy in 2023, with job growth, retail sales and service-sector activity all accelerating in January. The monthly pace of consumer-price gains also picked up.
Meanwhile, US economic growth in the fourth quarter was weaker than previously estimated, Commerce Department data showed, reflecting a downward revision to consumer spending as the Federal Reserve’s preferred inflation figures were revised higher.
Yellen also sounded optimistic that a way forward could be found to address concerns raised by allies including the European Union over access to raw materials used in batteries, saying that trade treaties between the US and partners focused on so-called critical minerals probably won’t require Congressional approval.
President Joe Biden’s administration has focused on such deals to lessen China’s role in supply chains for green energy technology, particularly those needed in electric vehicle batteries such as lithium and cobalt. More narrowly, they would allow partner countries to tap some benefits for automakers in the recent Inflation Reduction Act.
The US climate package includes about $500 billion in new spending and tax breaks over a decade to promote US manufacturing and services and gives certain exceptions for countries that have free-trade agreements with the US like Canada, Mexico and Australia.
Its focus on boosting American industry has angered trade partners from Asia and Europe who said it discriminated against their companies, particularly carmakers. The EU has been pushing for an agreement that would grant it equivalent status as a trade-accord partner of the US, while some of the bloc’s top officials are heading to Washington next month hoping to smooth over tensions tied to the plan.
–With assistance from Ramsey Al-Rikabi.
(Updates with details on critical minerals from 7th paragraph.)
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