The American economy remains strong, a White House economist claimed Tuesday while acknowledging that President Joe Biden’s team is concerned about a possible recession.
With inflation soaring at the fastest pace in more than four decades, and gas and home prices soaring, Americans are feeling the pain and the Federal Reserve is raising interest rates to cool the economy, causing the fuels fears of a sharp downturn.
Despite a contraction in the first three months of the year, core areas of the world’s largest economy remain in good shape, including the labor market and consumer spending, Cecelia Rouse, head of Biden’s Council of Economic Advisers, said on CNBC.
“If we look at the recession (risks) … obviously it’s worrying, but the bones of our economy are solid,” she said, noting that the United States is better positioned to meet the challenges than most other nations .
Also on Sunday, Treasury Secretary Janet Yellen tried to allay recession fears by saying a slowdown is not “inevitable” even if the economy will slow as it “translates to steady growth”.
Rouse said Biden’s focus on the inflation challenge linked to the Covid-19 pandemic: “Turning your back on a global economy isn’t easy.”
The snarl of the global supply chain has been a key factor in fueling price hikes and the pandemic lockdowns in China are adding to the ongoing uncertainty.
But Russia’s invasion of Ukraine is a “game changer,” she said.
“We all hope that the Fed can bring inflation under control without sacrificing maximum employment too much,” Rouse said. “We’re all hoping for the long-awaited soft landing.”
The Fed last week made its third rate hike this year, the biggest in nearly 30 years, and promised more big hikes in the coming months.
– “Relatively healthy” –
Richmond Federal Reserve Bank President Thomas Barkin said there was a risk of a recession but agreed there were many signs the economy was staying strong.
“Data on today’s economy still looks relatively healthy. Tomorrow, of course, is unclear,” Barkin said Tuesday in a speech prepared for an event in Richmond.
However, he conceded that fears of an impending downturn were not surprising given the Fed’s rate hikes and the uncertain outlook for the global supply chain.
But “not all recessions are created equal,” he said, and “it’s worth remembering that most other recessions aren’t as long or as deep.”
Getting the economy back to normal after the supply disruptions “may not require a catastrophic drop in activity”.
Barkin echoed Fed Chair Jerome Powell’s comments that the central bank has the tools and will do whatever it takes to bring inflation down, but warned that “we may or may not have help from global events and supply chains.” There is of course a recession risk.”
Earlier Tuesday, during a discussion with the National Association for Business Economics, Barkin said it was not yet clear how quickly and how far the central bank would need to move.
“You want to get back to where you’re going as quickly as possible without breaking anything,” he said.
#White #House #concerned #recession #economy #strong
