US Treasury Secretary Janet Yellen during an armchair discussion at the Rotman School of Management in Toronto, Ontario, Canada on Monday, June 20, 2022.
Cole Burston | Bloomberg | Getty Images
Treasury Secretary Janet Yellen said Tuesday that the U.S. economy was “doing very well” as rising energy prices, Covid-19 variants and Russia’s war with Ukraine have caught global markets in a vice grip.
“From the perspective of the United States, I think the United States is doing very well,” Yellen told CNBC’s Sara Eisen Tuesday. The Treasury Secretary is meeting with world finance leaders at the International Monetary Fund and World Bank’s annual meetings this week in Washington, D.C.
She said the economy was expected to slow after a very strong recovery, but a recent jobs report released last week revealed a “very resilient” economy. The Bureau of Labor Statistics reported Friday that nonfarm payrolls increased 263,000 in September, while the unemployment rate fell to 3.5%, tied for the lowest level since late 1969.
Consumers, however, have been somewhat constrained by prices rising at close to their fastest pace in more than 40 years. The latest New York Fed Survey of Consumer Expectations shows that consumers expect the inflation rate a year from now to be 5.4%, the lowest number in a year and a decline from 5.75% in August.
That level peaked at 6.8% in June and has been coming down since then, as the central bank has instituted a series of rate hikes totaling 3 percentage points. Markets largely expect the Fed to continue raising rates until it brings inflation down to its long-run target of 2%.
Yellen acknowledged that inflation is too high and that lowering it is a priority for the Biden administration. But she said there is a way to do that while maintaining a healthy labor market.
“Firms, even with rising interest rates, have debt burdens that are by and large manageable,” Yellen said. She added that U.S. financial markets continue to function well and the Treasury is not seeing signs of deleveraging that generally happens in an environment of tighter monetary policy.
Yellen also said the OPEC+ decision to reduce oil output and Russia’s continued war against Ukraine have also affected liquidity in the markets, but there are no signs that merit serious concern. Worries about the strength of the U.S. dollar are also a natural result of different paces of monetary tightening in the U.S. and other countries, she said.
“The dollar is a safe haven, so when times are uncertain, we experience capital inflows into our safe markets,” Yellen said. “And all of those things are pushing up the dollar vis a vis a broad range of countries.”
— CNBC’s Jeff Cox contributed to this report.