Source: Caixin.
Janet Yellen expects that the Federal Reserve will achieve its 2% inflation target next year. She also believes that the United States will not experience a severe economic recession.
On Monday, US Treasury Secretary Janet Yellen said that she did not believe the US economy would experience a recession. She expects the Federal Reserve to achieve its 2% inflation target next year, which is faster than what Federal Reserve policymakers predicted.
In a recent interview, she said, "I do expect inflation to come down and as we move into next year, I believe inflation will be back to the Fed's 2% target."
The median inflation indicator favored by the Fed officials announced last week is expected to return to 2% by 2026. Fed officials also hinted that there would only be one interest rate cut this year as the time needed to lower inflation was longer than expected.
Key to cooling inflation
Yellen pointed out that one important reason she expects inflation to continue to cool is because of housing costs. Despite a slowdown in price increases for other items, housing costs have remained high. She said that the rental prices for many new apartments across the country have stabilized and as more tenants renew their leases, costs will begin to decrease.
"This has kept housing costs higher than normal. I am very confident that this will come down next year and continue to push inflation downward," she added.
Yellen also announced measures aimed at helping to lower high housing prices, including providing $100 million in support of financing for affordable housing over the next three years through a new fund.
Data from the National Association of Realtors show that US house prices hit a historic high in May, with median prices for existing homes rising 5.8% from the same period last year to $419,300.
"I don't want to say there's a magic bullet to solving the problem of housing affordability. But we want to use every tool we have," Yellen said.
Timing of interest rate cuts
Yellen refused to disclose any clues as to when the Fed might cut interest rates, saying it all depends on what the data shows to policy makers.
However, she said the Fed is very aware of the risks of waiting too long. Currently, interest rates are at their highest level in 23 years and have remained at this level since July last year.
"Of course, they don't want to trigger an economic recession unnecessarily, and that's the balancing act they're taking," she said.
In addition, Yellen believes there will not be a severe economic downturn. She said,"I haven't seen the basis for an economic downturn in the outlook. I think we have a good and strong economy."
Editor/tolk