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Speaking to CBS’s 60 Minutes, United States Treasury Secretary Janet Yellen expressed optimism about the state of the US economy in the coming year, predicting a significant decrease in inflation in 2023. Yellen added that a recession isn’t necessary to bring prices under control.
Inflation refers to sustained increases in the prices of goods and services in an economy over a period of time. It’s measured using the Consumer Price Index (CPI), which tracks price changes of common goods and services used in American households. Governments fight to dampen inflation because once it becomes volatile the overall economy becomes like a puzzle that could collapse if the wrong piece is removed.
In her interview broadcast Sunday, Yellen said she believes that “by the end of next year, you will see much lower inflation if there’s not an unanticipated shock.” She referenced a few factors contributing to her cautious optimism, including lower gas prices and faster delivery times.
Yellen also said she hopes the ongoing state of inflation “will be short-lived.”
The U.S. “learned a lot of lessons from the high inflation we experienced in the 1970s,” Yellen continued, “And we’re all aware that it’s critically important that inflation be brought under control and not become endemic to our economy.”
The Federal Reserve is likely to implement its seventh interest rate hike on Wednesday. According to CNN, investors are anticipating the rate of increase will slow down to half a point. The Fed’s rate hikes have resulted in higher borrowing costs, raising interest on credit cards to their highest levels, prompting worries of a looming recession.
Secretary Yellen admitted a recession is possible, telling 60 Minutes, “There’s a risk of a recession. But it certainly isn’t, in my view, something that is necessary to bring inflation down.”
Ultimately, according to Yellen, the economy is transitioning from a period of rapid growth to something more stable. “We had a very rapid recovery from the pandemic,” Yellen said. “Economic growth was very high. To bring inflation down and because almost anyone who wants a job has a job, growth has to slow.”
