"WASHINGTON – America’s Treasury Secretary Janet Yellen said elevated gasoline prices -- near $5 a gallon -- are likely to persist, but she doesn't see a slowing U.S. economy slipping into recession.
Disruptions in global oil markets caused by sanctions imposed upon Russia are likely to keep oil prices elevated, she said Thursday. Oil prices typically drive gasoline costs.
She said President Biden's decision to release oil from the strategic petroleum reserve this year was the main tool the administration had to put downward pressure on prices.
"President Biden has done, I think, what he can do about that," she said. "But it's unlikely that gas prices are going to fall anytime soon."
President Biden said earlier this month that there was no near-term fix for high prices at the pump.
Still, while acknowledging high inflation and risks of an economic slowdown persist, Ms. Yellen said that she doesn't believe the U.S. will see an economic recession in the near term.
"I know people are very upset, and rightly so, about inflation," Ms. Yellen said at a New York Times event, "but there's nothing to suggest that a recession is in the works."
The U.S. economy contracted in the first quarter of this year, after growing rapidly following a brief recession in 2020. The Federal Reserve Bank of Atlanta estimates that the economy will grow at a 0.9% annual rate in the second quarter, a significant slowdown from last year's pace.
Inflation is hovering above 8%, its highest levels in four decades, and has presented a vexing challenge for the Biden administration. The White House has struggled in its messaging on the issue. Ms. Yellen and other administration officials have recently embarked on a renewed campaign to try to improve Americans' view of the economy.
The Treasury secretary recently said she was wrong when she projected in early 2021 that inflation wasn't likely to pose a problem for the U.S. economy.
Ms. Yellen maintained that there are bright spots in the economy, while pointing to the Fed's tightening monetary policy and Russia's sanctions as among factors that pose risks to the global and domestic outlook. The Federal Reserve is raising interest rates and taking other steps as part of an aggressive effort to cool inflation, which some economists and market forecasters believe could trigger a recession
"It's an art," the former Fed chairwoman said of the central bank's policy. "That could result in a recession, but we're in a very strong economy."
She said she believes there is a path for the Fed to engineer a so-called soft-landing, a scenario in which the central bank successfully cools inflation without triggering a substantial pullback in the labor market and overall economy.
She pointed to strength in the labor market and household savings as factors buoying the U.S. economy currently.
Given those underlying strengths, she said it was surprising how negatively many Americans' view the economy.
Ms. Yellen said it was difficult to convince Americans of the economy's merits. That is because many Americans' shape their views of inflation based on gas prices, which set a record high this week, according to AAA.
"Inflation expectations are driven by gas prices, at least at the household level. That is what people see and how they think about inflation," she said.” [1]
It seems that sanctions upon Russia are having a political price for USA government since the sanctions are increasing gasoline prices. How big is the political price? We will see soon during the upcoming elections in November.
1. U.S. News: Yellen Sees High Gas Prices Persisting
Omeokwe, Amara; Duehren, Andrew.
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 10 June 2022: A.5.
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