The US central bank (Fed) still hopes to be able to slow inflation without causing a recession. Two days before a meeting, which will be held on Tuesday and Wednesday to raise its key rates, the American secretary of the Treasury, Janet Yellen, assures her: the American economy “is slowing down” but the economic data do not announce a recession. . ” A recession is a general contraction that affects many sectors of the economy. We just don’t have that “, declared Sunday the Minister of Economy and Finance of Joe Biden, in an interview with the chain NBC, highlighting in particular “ the labor market (which) is now extremely strong ».
However, “ we are in a period of transition where growth is slowing down. And it is necessary (…) to grow at a steady and sustainable pace. So there is a slowdown “, detailed the one who, in 2021, also prophesied that inflation would not last and was a temporary phenomenon.
« I’m not saying we’ll definitely avoid a recession, but I do think there’s a way to keep the labor market strong and bring inflation down. “said Janet Yellen.
Prices continue to climb in the United States, with an increase that reached a new record in June, at +9.1% over one year. To ease the pressure on prices, the Fed has been raising its key rates since March, which has the effect of making credit more expensive and therefore curbing consumption. Across the Atlantic too, inflation has pushed the European Central Bank (ECB) to raise its interest rates on Thursdayfor the first time in more than ten years, by half a point.
Uncertainty
At the same time, the growth of the gross domestic product (GDP) of the United States in the second quarter will be published on Thursday and is expected to increase very slightly. But it had been negative in the first quarter (-1.6%) or a recession is defined by two consecutive quarters of negative growth. Nevertheless, according to the minister, the American economy would not be in recession, even if growth were negative in the second quarter: “ what a recession really means is a general contraction of the economy. And even if this number (of GDP in the second quarter) is negative, we are not currently in a recession. “, she insisted.
Former Fed Vice Chairman Donald Kohn believes, for his part, than a slight recession with unemployment higher than the 3.7% forecast by the Fed for 2022, “will be necessary to break this inflationary spiral”, he told AFP. ” But the uncertainty is so huge “, he added.
Towards an increase of three-quarters of points
At its meeting on Tuesday and Wednesday, the Fed’s monetary committee will raise its rates again. These are currently in a range of 1.50 to 1.75%. The institution must however ensure that this voluntary slowdown in economic activity is not too strong, so as not to weigh down, in particular, the labor market. The hypothesis of an increase of three-quarters of a point (75 basis points), as at the last meeting, in mid-June, thus seems to be unanimous. It was then the strongest increase since 1994. They want to try to achieve what they call a soft landing, trying to avoid a recession “, commented for AFP Julie Smith, professor of economics at Lafayette University in Eaton, Pennsylvania.
One of the institution’s governors, Christopher Waller, recently opened the door to a one-point increase (100 basis points). The members of the monetary committee will probably discuss This hypothesis, according to Julie Smith, ” simply because the inflation figures remain very bad “. However, she believes,he other signs (…) indicate that previous rate hikes have most likely started to work, at least to slow demand (in) the housing market ».
The real estate market, in fact, has slowed down considerably due to exorbitant property prices and rising interest rates. However, thousands of job offers still do not find takers. And consumption is holding up, despite sales inflated by inflation.
(With AFP)