US Treasury’s Yellen is ‘very optimistic’ about outlook for US economy By Reuters

By David Lawder and Kanishka Singh

WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen said on Tuesday she was very optimistic about the outlook for the U.S. economy, adding that inflation was coming down in the short term and the labor market was “extremely strong.”

“I am very optimistic about the U.S. economic outlook. Short term: inflation is coming down in the context of an extremely strong labor market,” Yellen said at a Fortune CEO event on Tuesday.

“Medium term: we are now engaging in a very substantial program of investments to strengthen our economy, to boost our productive capacity,” Yellen said.

U.S. gross domestic product is still expanding at a pace well above what Federal Reserve officials regard as the non-inflationary growth rate of around 1.8%, often referred to as the “potential” growth rate.

U.S. GDP expanded at a 2.4% annualized rate in the second quarter, and some estimates put the current quarter’s pace at more than twice that.

The treasury secretary added she was pleased that Congress passed a deal over the weekend that averted a government shutdown. She previously said that a U.S. government shutdown would be a “risk factor” for a potential economic recession.

Yellen also said interest rates would return to more normal levels in the medium term.

Commenting on artificial intelligence, Yellen said progress in that field was “unbelievably rapid” and could make a significant difference in productivity.

Yellen also said the United States had an over-dependence on China in some key areas.

“I think we have an over-dependence on China in areas that are critical to our national well-being,” Yellen said, adding the U.S. needed to de-risk some of that without completely disengaging from China.

Yellen visited China in July and has been one among a number of key officials in the administration of President Joe Biden to have made such a visit in recent months. The two countries have agreed to keep lines of communication open.