US economy is heading into a short and shallow recession, say economists in poll

US Treasury Secretary Janet Yellen said on Thursday (December 8) that a recession in US was ‘not inevitable’, adding that the economy was on the right track in lowering inflation. Yellen spoke with reporters during her visit to the Bureau of Engraving and Printing’s currency facility in Fort Worth, Texas.

On “whether or not we can avoid a recession, I believe the answer is yes,” she told reporters.

Yellen’s comments came on the heels of a forceful campaign by the US central bank to cool demand this year, walking a tightrope between lowering consumer costs while trying not to tip the economy into a downturn.

Meanwhile, a Reuters poll said that the US economy is heading into a short and shallow recession over the coming year. The economists polled by Reuters unanimously expected the US Federal Reserve to go for a smaller 50 basis point interest rate hike on December 14.

After raising the federal funds rate 75 basis points at each of the previous four meetings, all 84 economists polled from December 2-8 expected the central bank to go for a slightly softer half a percentage point to 4.25 per cent-4.50 per cent this time.

There is still a feeling among economists that the US may experience downturn next year.

Yellen however, said that supply chain bottlenecks had begun to ease and new apartment rents have “essentially peaked,” with the labour market cooling slightly as well.

“Without seeing significant net nationwide layoffs, I believe we’re on the right track in terms of lowering inflation and a recession’s not inevitable,” she added.

As businesses tone down their growth expectations and hiring plans, the number of people leaving their jobs has also dipped a little, she said.

Last week, Federal Reserve Chair Jerome Powell added it remains “very plausible” for the US to reach a soft landing, referring to a scenario where unemployment rises but the economy avoids a severe recession.

(With inputs from agencies)

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