The U.S. economy is likely to slow in coming months, but a recession is not inevitable, Treasury Secretary Janet Yellen said Sunday.
Consumer spending is strong, bank balances are high and the unemployment rate is near historic lows — all indications that recession is not a given, Yellen said on ABC’s “This Week.”
“Clearly inflation is unacceptably high. It’s President Biden’s top priority to bring it down,” she said. “I believe it’s possible. I don’t think a recession is inevitable.”
Economists put the probability of recession at 44% in the next 12 months, according to a survey by The Wall Street Journal published Sunday.
To battle the nation’s inflation rate, the Federal Reserve last week approved its largest interest rate increase in more than a quarter century, a hike of three-quarters of a percentage point.
“I expect the economy to slow,” Yellen said. “It’s been growing at a very rapid rate, and the economy has recovered and we have achieved full employment.
“We expect a transition to steady and stable growth,” she said.
Disagreeing with Yellen was former Treasury Secretary Larry Summers, who predicted on NBC’s “Meet the Press” that a recession “is ahead.”
As it happens
Get updates on the coronavirus pandemic and other news as it happens with our free breaking news email alerts.
“In order to do what’s necessary to stop inflation the Fed is going to raise interest rates enough that the economy will slip into recession,” said Summers, who served in the administration of former President Bill Clinton.
To help consumers cope, some members of Congress have called for gas tax holidays now that fuel prices are hovering at about $5 a gallon. Yellen said the president could be open to giving Americans a tax break on fuel.
The federal tax on gasoline is 18.4 cents per gallon.
“President Biden wants to do anything he possibly can to help consumers,” she said. “So he stands ready to work with Congress, and that’s an idea that’s certainly worth considering.”
The drawback is that those gas tax revenues pay for the nation’s roads, Energy Secretary Jennifer Granholm said on CNN’s “State of the Union.”
“It’s one of the tools,” she said. “If we remove the gas tax, that takes away the funding that was just passed by Congress” to improve the nation’s infrastructure.
Biden signed a $1 trillion infrastructure bill into law in November that included funds to upgrade and improve roads, bridges and transit systems.