Janet Yellen expresses growing confidence that the US will achieve a soft landing and maintain job market stability. Yellen welcomes data indicating a steady inflation slowdown and an influx of job seekers, seeing minimal harm to the job market.
Yellen expressed optimism about her prediction, stating her confidence in the US avoiding a recession while curbing consumer-price increases. Yellen reaffirmed her positive outlook, emphasizing that the current trajectory aligns with her expectations.
She emphasized that all indicators for soft landing inflation are currently trending downward. She noted the recent increase in the US unemployment rate, following record lows earlier this year. It did not result from a significant surge in layoffs.
Last month, the unemployment rate reached 3.8%, partially attributed to the labor force participation rate reaching its highest point since February 2020, coinciding with the onset of COVID-19.
Yellen expressed the significance of observing improvement in the job market, emphasizing that it’s positive when more individuals are actively seeking employment.
The data serve as a form of confirmation for the Treasury Secretary. She has consistently maintained the possibility of reaching the Fed’s target of soft landing inflation at 2% without a sharp increase in unemployment.
Despite rising mortgage rates, the housing market has exhibited signs of steadiness, and consumer spending continues to show consistent growth, dissuading economists from predicting an imminent recession.
Upcoming weeks are Crucial for Soft Landing Inflation
U.S. stock investors are shifting their attention to upcoming inflation data next week, a crucial factor that could shape the near-future trajectory of the equity rally. The S&P 500’s impressive 16% year-to-date climb has been fueled by indications that the U.S. economy is heading toward a scenario where the Federal Reserve successfully soft landing inflation without causing significant harm to growth.
Headline inflation has gradually decreased to around 3%. It still remains above the Federal Reserve’s target of soft landing inflation at 2%, and this hasn’t resulted in a reduction in employment or GDP.
Economists have been retracting or delaying their recession forecasts. Data indicate ongoing strength in consumer spending and hints of housing market stabilization.
Goldman Sachs Group Inc. economists now believe there is a 15 percent chance of the US entering a recession, marking a decrease from their earlier estimate.
Yellen showed Concern about China’s plan for BRICS
During an interview on her plane returning from the G20 summit in New Delhi, the Treasury Secretary downplayed concerns about China’s attempts to enhance the influence of the BRICS group of emerging nations.
She emphasized that the G20 continues to serve as the primary platform for worldwide collaboration.
Yellen and President Biden participated in the event, while China’s President Xi Jinping opted not to attend amid encouraging data on the world’s largest economy.
Chinese Economy Slowdown
While the US has shown encouraging indicators, China has reported disappointing data, casting doubt on Beijing’s 5 percent growth target. Yellen restated her belief that China’s policymakers maintain room to enhance economic support measures if required.
Yellen stated that there is ample policy flexibility in China should they determine the need to deploy it. Varied economic data between the two nations have caused China’s currency to weaken against the dollar.
Last week, the offshore yuan approached a historic low due to this divergence in economic performance. Given the circumstances, Yellen indicated that Beijing’s efforts to address the currency’s decline are reasonable.
Yellen explained that China seeks to instill confidence in its economy and financial system domestically and internationally.
Yallen talked about the Alliance with BRICS countries and G20
She emphasized that this series of meetings vividly showcased the G20’s dominant and preeminent role in global cooperation. Her recent trip solidified India’s position as the country Yellen has visited most frequently in her capacity as Treasury secretary.
The US has been actively strengthening connections with emerging markets, including a growing relationship with Vietnam, a center for consumer electronics production. Following his visit to India, President Biden proceeded to Vietnam, while Janet Yellen also visited the country earlier in the summer.
Yellen emphasized the US’s robust and growing alliances with some BRICS-11 members, highlighting recent collaborations like biofuel initiatives with Brazil and South Africa. She underscored the significance of G-20 efforts in addressing global challenges, such as health, food security, and lending, in the past few years.