[Text/Observer Network Zhou Yibo]
On September 21, local time, the Federal Reserve announced that rate hikes 75 basis points to cope with soaring inflation, causing concerns about the rise in the US unemployment rate and economic recession. Former U.S. Treasury Secretary Lawrence Summers even commented that the unemployment rate will first increase to 5% before U.S. inflation drops to 2.5% within 6 months.
According to Bloomberg, on September 22, US Treasury Secretary Yellen mentioned this matter in an interview event, saying that domestic inflation "definitely" will decline next year, and the "path" that neither significantly increases the unemployment rate nor reduces inflation exists, so the unemployment rate will not increase significantly.
Yellen insists that although the US labor market is in the "most tense state in history", he believes that the current "historical low unemployment rate" can still be maintained and the US economy will not fall into recession as a result.
Bloomberg report screenshot
It is reported that on the 22nd, Yellen participated in an interview organized by the American magazine " Atlantic" (The Atlantic) in Washington, DC, USA to discuss the future economic situation in the United States.
At the beginning of the interview, Yellen clearly admitted that the inflation problem in the United States has been "very tricky". "First of all, what I want to say is that I think the inflation rate (the United States) has always been at an unacceptable high level."
"This is a big problem for every American family, which brings huge, economic insecurity to Americans."
Yellen believes that there are many reasons for high inflation, including supply chain shortages caused by the new crown epidemic, and it is also related to the outbreak of the Russian-Ukrainian conflict, but the Biden administration and the Federal Reserve are working to resolve the problem.
According to a previous report by Observer.com , on September 21, the Federal Reserve ended a two-day monetary policy meeting and announced that it would raise the target range of the federal funds rate by 75 basis points, increasing it to between 3% and 3.25%, reaching the highest level of the federal funds rate since the 2008 global financial crisis.
Federal Chairman Powell admitted that this rapid tightening of monetary policy may bring "pain" to the US economy, including rising unemployment rates and adjustments to the real estate market. He admitted that the current inflation level is not as low as the Fed expects. It is very difficult to achieve the goal of reducing the inflation rate to 2%, while maintaining a strong "soft landing" in the domestic labor market.
On September 21, after the Federal Reserve announced a 75 basis point rate hike, Powell held a press conference. Source: Pengpai Image
In an interview on the 22nd, Yellen also directly admitted that the US labor market is in the "most tense state in history", but the US economy will not fall into recession because of this.
"A comprehensive economic recession refers to a period of excessive unemployment." Yellen said, "I believe we can continue to maintain what most Americans think is the ‘lowest unemployment rate’ and a strong labor market where people can find jobs."
Then, Ron Brownstein, senior editor of the Atlantic Monthly, asked Yellen whether domestic inflation can be controlled by the end of next year and whether it will become one of the campaign themes of the 2024 US election.
"I believe (inflation) will fall, and it will definitely fall next year." Yellen replied, "But it should be clear that this is also risky."
Yellen said that given the lingering risks of the ongoing outbreak of the Russian-Ukrainian conflict, it is still necessary to announce the end of inflationary pressure carefully.
"Maybe we can survive next year, but I am sure inflation will decline." Yellen said that the "path" that neither significantly increases the unemployment rate nor reduces inflation exists, "I look forward to the success of the Federal Reserve."
On September 22, Yellen participated in an interview event organized by the Atlantic Monthly in Washington, DC. Source: Bloomberg
According to the latest quarterly economic forecast released by the Federal Reserve on the 21st, the median forecast of economic growth from the fourth quarter of last year to the fourth quarter of this year was 0.2%, significantly lower than the 1.7% forecast in June, reflecting that their expectations for the US economic outlook are more pessimistic.
forecast shows that the median forecast for the U.S. unemployment rate in the fourth quarter of 2023 is 4.4%, up 0.5 percentage points from the June forecast.
On the same day, former US Treasury Secretary Lawrence Summers commented on Twitter on Fed rate hike , saying, "I am happy to bet with anyone: before we see inflation drop to 2.5% within 6 months, we will see the unemployment rate soar to 5%.
Yellen also responded to this in an interview on the 22nd. She believes that the "path" that neither significantly increases the unemployment rate nor reduces inflation exists. Federal Reserve officials may need to ease some labor market pressure, but the unemployment rate does not necessarily rise to 5%. "I am very much looking forward to the success of the Federal Reserve."
However, Reuters previously reported that recent inflation data showed that although the Federal Reserve has taken radical tightening measures, announcing a 75 basis point rate hike in June and July, the situation has almost no improvement, the labor market is strong, and wages are rising.
report is expected to raise interest rates by AP at the remaining two monetary policy meetings this year, which means the Fed will have another 75 basis points hike. New forecasts show that by the end of this year, the federal funds rate will rise to the range of 4.25% to 4.50% and between 4.50% and 4.75% by the end of 2023.
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