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Yellen said the policies of Bidenomics are rooted in what she laid out early last year as “modern supply-side economics.” Image Credit: Bloomberg

Washington: Treasury Secretary Janet Yellen reiterated her optimism about the US economy, saying inflation can slow down without a slump in employment, even if growth cools.

“Our economy has proven more resilient than many had thought,” amid forecasts of recession, Yellen said in excerpts of remarks due to be delivered later Friday in New Orleans. “I continue to believe that there is a path to reducing inflation while maintaining a healthy labor market. Without downplaying the significant risks ahead, the evidence that we’ve seen so far suggests that we are on that path.”

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Yellen said in an interview last week that she sees diminishing risk for the US to fall into recession, and suggested that a slowdown in consumer spending may be the price to pay for finishing the campaign to contain inflation.

“While there are parts of our economy that are slowing down, households are spending at a robust pace and businesses continue to invest,” Yellen said in the excerpts, released by the Treasury Department. “Going forward, I expect the current strength of the labor market and robust household and business balance sheets to serve as a source of economic strength, even if our economy does cool a bit more as inflation falls.”

Federal Reserve officials have raised interest rates by 500 basis points in little more than a year and have signaled more tightening will be needed to rein in an inflation rate that’s running higher than the Fed’s 2 per cent target.

They’ve warned that returning inflation to the goal will likely require a period of below-trend growth and some softening of labor-market conditions.

Yellen touted President Joe Biden’s legislative achievements that stepped up investment in infrastructure, semiconductors and the green-energy transition.

She is the latest administration official to do so, two days after the president delivered what the White House called a “cornerstone” address on his economic policy, “Bidenomics,” with his office seeking to improve perceptions about his job performance before the 2024 election campaign gets into full swing.

Yellen said the policies of Bidenomics are rooted in what she laid out early last year as “modern supply-side economics.”

The idea is to “prioritize investments in our workforce and its productivity in order to raise the ceiling for what our economy can produce,” Yellen said, highlighting how the Bipartisan Infrastructure Law, CHIPS and Science Act, and Inflation Reduction Act constitute “one of the most important economic investments” the US has made to date.