US Secretary of the Treasury Janet Yellen on Thursday declined to offer a new forecast on inflation for the end of this year as she acknowledged that fallout from Russia’s invasion of Ukraine would worsen price rises, which last month hit another 40-year high.
“I think there’s a lot of uncertainty that is related to what’s going on with Russia and Ukraine,” Yellen said in an interview with CNBC television. “I do think it’s exacerbating inflation.”
While Americans are facing the consequences of tough sanctions against Russia, Yellen said that the price would not be so high as an economic downturn.
Photo: AFP
“We’ve got a good strong economy with an excellent outlook for the labor market and real activity going forward,” she said. “Inflation is a problem and it’s one that we need to address, but I don’t expect a recession in the United States.”
Early last month — before Russia’s military offensive began — Yellen had predicted that inflation in the US would drop to about 3 percent on a year-on-year basis by the end of this year.
“I don’t want to make a prediction exactly as to what’s going to happen in the second half of the year,” she said on Thursday. “We’re likely to see another year in which 12-month inflation numbers remain very uncomfortably high.”
US consumer-price inflation last month reached a fresh 40-year high, a report showed.
Prices jumped 7.9 percent from a year earlier.
Yellen also said she believed that the US Federal Reserve could achieve a “soft landing” for the economy — taming inflation without triggering a recession.
“I have confidence in their ability to make a meaningful difference,” she said of Fed policymakers, who have signaled they will start raising interest rates next week.
Goldman Sachs Group Inc’s economists have cut their growth forecasts for the US economy due to the hit from soaring oil prices and other effects from the war in Ukraine.
Economists led by Jan Hatzius lowered their real GDP growth forecast for this year to 1.75 percent — on a fourth quarter-to-fourth quarter basis — down from 2.0 percent.
“This forecast implies below potential growth in 2022 Q1 and 2022 Q2 and potential growth for 2022 overall,” the economists wrote in a note, adding that higher oil and agricultural prices would weigh on disposable incomes.
“We now see the risk that the US enters a recession during the next year as broadly in line with the 20-35 percent odds currently implied by models based on the slope of the yield curve,” they wrote.
The downgrade comes as the IMF is likely to cut its projection for global growth for this year when it presents revised forecasts ahead of the lender’s spring meetings next month, IMF Managing Director Kristalina Georgieva said.
The IMF in January lowered its projection for this year to 4.4 percent as the COVID-19 pandemic entered its third year, citing weaker prospects for the US and China, along with persistent inflation.
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