'Not Recession, But Slowdown': Treasury Chief Claims US Economy Not Shrinking

The country has been hit by skyrocketing inflation since November 2021, with economic problems further exacerbated in 2022 by the West’s anti-Russia sanctions. The distortion of logistic networks and surging oil and energy prices resulting from the sanctions further drove US prices up, prompting fears of a recession.

US Secretary of Treasury Janet Yellen has dismissed the idea that the US economy is likely to plunge into recession in 2022, opting to describe the troubles as "slowing growth" instead in her interview with the NBC.

Yellen argued that the contraction that the US economy is currently experiencing, as well as the negative growth projected to be seen by the end of the year, are only natural considering the explosive growth the US economy underwent in 2021.

"The economy is slowing down. Last year it grew very rapidly at about 5.5% and that succeeded in putting people back to work, who had lost their jobs during the pandemic. The labor market is now extremely strong. […] This is not an economy that is in recession. But we are in a period of transition in which growth is slowing and that is necessary and appropriate,” she said.

The Treasury chief went on to argue that the US economy needs to be growing "at a steady and sustainable pace" instead of what had been witnessed in 2021. She reiterated that the economic "slow down" that US businesses are witnessing is "appropriate", and can't be considered a recession as it allegedly does not affect many sectors.

Earlier, Yellen admitted that she was wrong about the nature of inflation, which is considered to be one of the reasons behind the recession. In March 2021, she claimed that inflation was temporary and would not be exacerbated by another round of Democrat-led financial stimuli.

Inflation went on to exceed 7% in November that year, before growing even higher in 2022, especially after western nations announced their sanctions against Russia which ramped up global oil, gas, gasoline, fertilizer and food prices. In an attempt to reign in inflation, the Federal Reserve started to increase interest rates for the first time in years, bringing them to levels of 1.5% - 1.75%.

Fed's chair Jerome Powell has hinted that interest rates could grow even higher by the end of the year as part of efforts to slow down the reportedly "overheated" US economy. However, his comments sparked fears that the slowdown might result in full-on recession.