Treasury Secretary Janet Yellen recently expressed optimism about the U.S. economic outlook in an exclusive interview with Yahoo Finance. She dismissed concerns about an impending recession and projected that inflation would recede to the Federal Reserve’s target of 2% next year, ahead of the central bank’s own projections.
Yellen highlighted several factors contributing to her optimistic inflation outlook, particularly focusing on housing costs. She noted that while shelter costs, especially rental prices, have remained high, stabilizing trends in the rental market are expected to alleviate some inflationary pressures over the coming year. This stabilization could occur as more renters renew their contracts at steady rates, thereby reducing the overall increase in housing costs.
To address high housing costs more directly, Yellen announced measures including a $100 million fund aimed at supporting affordable housing financing over the next three years. This initiative underscores the administration’s commitment to tackling housing affordability issues amid record-high home prices, which have seen a 5.8% increase year-over-year according to the National Association of Realtors.
Despite the current economic challenges, Yellen expressed confidence in the resilience of the U.S. economy. She emphasized that while the Federal Reserve continues to monitor economic data closely, including inflation trends and the impact of high interest rates, she does not foresee the need for aggressive monetary policy actions that could potentially trigger a recession unnecessarily.
Yellen also critiqued the corporate tax cuts implemented during the Trump administration, attributing them to exacerbating fiscal deficits without delivering the promised investment boom. She highlighted President Biden’s proposed budget for 2025, which includes substantial deficit reduction measures aimed at stabilizing the debt-to-GDP ratio, currently at 100%.
Overall, Yellen’s comments reflect a balanced approach to managing economic challenges, emphasizing targeted interventions in areas like housing while maintaining a cautious but optimistic view of the broader economic landscape.