Tags: yellen | reason | recession | fed | economy

Yellen: 'There Is Good Reason to Worry' About Recession

By    |   Friday, 22 November 2019 11:55 AM

Former Federal Reserve Chair Janet Yellen warned that increasing economic risks threaten to eventually push the U.S. into another recession.

She said while the U.S. economy is in “excellent” shape one of the most prominent risks is wealth disparities, which she said are “extremely disruptive.”

In a downturn, the Fed would have little room to move, due to low rates, she added.

Yellen also said tariffs the U.S. has leveled on Chinese imports aren’t doing any good.

“I would bet that there would not be a recession in the coming year. But I would have to say that the odds of a recession are higher than normal and at a level that frankly I am not comfortable with,” Yellen said at the World Business Forum.

With three rate cuts this year, there remains “not as much scope as I would like to see for the Fed to be able to respond to that. So there is good reason to worry,” Yellen said, CNBC reported.

The U.S. economy has slowed but remains relatively solid. Uncertainty over the country’s trade policy has dented business investment and chilled global growth. But consumers are still spending, helped by a tight labor market where the lowest unemployment level in nearly 50 years is gradually lifting wages.

Despite the central bank’s efforts to guide the economy, Yellen cited “a very worrisome long-term [trend] in which you have a very substantial share of the U.S. workforce feeling like they’re not getting ahead. It’s true, they’re not getting ahead.

“It’s a serious economic problem and social problem because it means the gains of our economic system are not being widely shared,” she added. “It leaves people ultimately with the feeling that the economy is not working for them, a sense of social discontent that is extremely disruptive,” she said.

“I see no sign that that’s been successful in turning around these trends,” she said of the protectionist trade actions. “These tariffs are taxes on American consumers and businesses. It’s making it more difficult and more expensive to do business, to control costs, and consumers are seeing higher prices from it.”

Meanwhile, a recent Reuters poll of economists found that the U.S.-China trade war is unlikely to see a permanent truce over the coming year, and while concerns have eased over a U.S. recession, an economic rebound is also not expected any time soon.

The Nov. 8-13 Reuters poll of over 100 economists showed a quarter-point Federal Reserve interest-rate cut would come in the third quarter next year; a poll three weeks ago had predicted a cut early next year.

That shift in expectations came after Fed Chairman Jerome Powell indicated that while the central bank was cautious about the trade conflict and slowing growth, it would now pause after cutting rates three times this year to 1.50-1.75%.

While most major central banks are concerned about the ongoing trade dispute, stocks on Wall Street have touched record highs over the past few months on hopes for a resolution between Washington and Beijing.

But economists do not share the same view. While the median probability of a recession for the coming year fell to 25% from 35% last month, the economic growth outlook remained modest.

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Former Federal Reserve Chair Janet Yellen warned that increasing economic risks threaten to eventually push the U.S. into another recession.
yellen, reason, recession, fed, economy
Friday, 22 November 2019 11:55 AM
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