Many economists expect the U.S. economy to tip into a recession. Treasury Secretary Janet Yellen isn’t one of them.
Speaking in Washington Tuesday ahead of World Bank meetings this week, Yellen highlighted recent data showing parts of the economy holding up even as the Federal Reserve continues its campaign of anti-inflation interest rate hikes.
“The U.S. economy is obviously performing exceptionally well, with continued solid job creation, inflation gradually moving down, robust consumer spending," she said. "I'm not anticipating a downturn in the economy,”
While Yellen acknowledged there is a risk of a recession, her remarks contrast with those of many economists, including those at the International Monetary Fund, who said in a report Tuesday the collapse of Silicon Valley Bank last month and the ensuing stress in the banking system raised the chances of a recession in the U.S. and other advanced economies because banks are likely to curtail lending.
Yellen built her more optimistic assessment on reports showing the U.S. economy added more jobs than expected in March and consumer price increases cooled this month to the lowest since September 2021.
Yellen also countered IMF concerns that “friendshoring” economic policies by the U.S. and other countries—strengthening trading ties with friendly nations instead of their rivals—would lead to “fragmentation” of world trade that would damage global economic growth. The U.S. has enacted policies to encourage computer chip manufacturing in the U.S. and friendly countries such as South Korea, while banning the export of semiconductor technology to China.
“Friendshoring is an approach to dealing with supply chain risks that are very real, but maintain tremendous scope for global trade to continue,” Yellen said. “We're mainly concerned about over-dependence on some critical areas from China and are seeking to reduce that dependence.”