Reuters - U.S. Treasury Secretary Janet Yellen told Reuters on Thursday that U.S. economic growth was likely stronger than suggested by weaker-than-expected data on first-quarter output and said the Biden administration was keeping all options open to respond to threats from China's excess industrial capacity.
In a wide-ranging Reuters Next interview, Yellen also said that a U.S. proposal for using the interest earnings from $300 billion in frozen Russian assets to aid Ukraine could win broad support from G7 allies.
Yellen said U.S. GDP growth for the first quarter could be revised higher after more data is in hand and inflation will ease to more normal levels after a clutch of "peculiar" factors held the economy to its weakest showing in nearly two years.
"The U.S. economy continues to perform very, very well," Yellen said in an interview with Reuters , responding to the Commerce Department's report showing that U.S. gross domestic product grew at a 1.6% annualized rate last quarter.
That was below the 2.4% estimated by economists and less than half the pace in the fourth quarter of 2023 - thanks to substantial drags from trade and private inventories. The report also showed a worrisome surge in inflation, with the personal consumption expenditures (PCE) price index excluding food and energy rising at a 3.7% annual rate after a 2.0% pace in the fourth quarter of 2023.
Yellen downplayed the inflation jump and said she did not see that as indicating that unemployment needed to increase or other areas of the economy needed to cool to return inflation to the Fed's 2% target.
"The fundamentals here are in line with inflation continuing back down to normal levels," Yellen said.
Fighting inflation remained President Joe Biden's top priority, Yellen said, highlighting his administration's efforts to reduce healthcare, energy and housing costs. But Biden, a Democrat, has struggled to translate U.S. economic strength into voter support ahead of the November presidential election.
Republican challenger Donald Trump led Biden by seven percentage points in a recent Reuters/Ipsos poll when voters were asked which candidate would be better for the economy.
"What I focus on most is the strength of consumer spending and investment spending," Yellen said. "Those two elements of final demand came in in line with last year's growth rate ... so this is the underlying strength of the U.S. economy that showed continuing robust strength."
"The headline figure was off a little bit but for reasons that are peculiar and not really indicative of underlying strength," she added.
Indeed, a number of private economists said the GDP data likely overstated any weakness in an economy that had grown at above the rate most see as its potential for nearly two years, despite aggressive interest rate hikes over that span by the U.S. Federal Reserve aimed at quashing inflation.
Yellen said dollar strength has been another byproduct of U.S. growth and tight monetary policy. She acknowledged that this has put some pressure on other countries, but said currency interventions should occur only in "very rare and exceptional circumstances," when markets are disorderly with excessive volatility.
She declined to comment on the Japanese yen's value when asked whether it was out of line with fundamentals. Last week, the U.S., Japan and South Korea agreed to consult closely on currencies, acknowledging concerns from Tokyo and Seoul over their currencies recent sharp declines against the dollar.
Sumber : Reuters
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