Yellen sees ‘resilience’ in US economy even as it cools

WASHINGTON: US economic growth and wage gains should “serve as a source of resilience” moving forward even if the economy continues to cool, Treasury Secretary Janet Yellen said in remarks released on Friday (Aug 11).

“I still believe that there is a path to continue reducing inflation while maintaining a healthy labour market,” she said, in excerpts of a speech to be delivered in Nevada next week.

“While there are risks, the evidence we’ve seen so far suggests that we are on such a path,” Yellen added.

The world’s biggest economy has defied expectations of a slowdown, picking up pace in the second quarter of the year, supported by business investment and consumer spending. Its labour market has remained robust as well.

The strength comes despite policymakers’ efforts to ease demand and rein in inflation, fuelling hope that the central bank’s aggressive campaign of interest rate hikes will lower price increases without triggering a major recession.

Yellen noted in prepared remarks that annual inflation is now nearly six percentage points below its 9.1 per cent peak in June 2022, while the economy continues to expand.

Real average hourly earnings have increased over the past year as well, reversing some wage inequality that has accumulated in recent decades, she added.

“I expect the important gains that we’ve made over the past two and a half years to serve as a source of resilience in the weeks and months to come, even if we see further cooling in our economy,” Yellen said.

In July, consumer inflation inched up for the first time in around a year, keeping pressure on the central bank as officials mull further interest rate hikes.

But the inflation figure remains moderate compared with last year’s numbers.

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