“It is up to the Fed (…) to remedy the imbalances between supply and demand,” said the US Treasury Secretary.
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It is possible to lower high inflation in the United States, while maintaining the good health of the labor market, said the Secretary of the US Treasury, Janet Yellen on Thursday, saying that she hopes that the American central bank (Fed) “will succeed.”.
“I think there is a path to successfully reducing inflation while maintaining (…) a strong labor market. And I very much hope the Fed gets there, “said Joe Biden’s Minister of Economy and Finance.
On Wednesday, the Fed made another steep hike in its benchmark rate in order to slow the economy and ultimately fight inflation. Its president, Jerome Powell, warned that the fight against inflation would be painful for the economy.
But the shortage of workers in the American labor market, which leads to higher wages, is one of the sources of inflation, the minister said, citing “probably inflationary pressures from the labor market” and pointing out that “it is the job of la Fed (…) to address the imbalances between supply and demand “.
The US Federal Reserve also updated its economic forecasts on Wednesday after the monetary policy meeting. He predicts that the slowdown in activity caused by rate hikes will lead to a slightly stronger rise in unemployment than previously expected.
The unemployment rate is expected to reach an average of 3.8% in 2022 (3.7% previously forecast), and then rise to 4.4% in 2023 (from 3.9%). It was 3.7% in August, one of the lowest in the last 50 years.
But some economists believe these forecasts are too low. Therefore, former US Treasury Secretary Larry Summers warned in a tweet on Wednesday that the unemployment rate would likely have to rise above 5% to see a strong and lasting slowdown in inflation.
Janet Yellen acknowledged that there is “a need to ease the pressure on the labor market”, but without “the unemployment rate (must) increase as much”, she added.
“We can still have a good and solid job market. Without too much pressure on wages, “he said.
Inflation in the United States stood at 6.3% yoy in July, according to the latest available data from the PCE index, used by the Fed. It wants to bring inflation back to around 2%.
There is another inflation index, the CPI, which is a particular reference for the indexation of pensions. In August it reached 8.3% in one year.
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