Inflation To Finally Subside After The New Year?
Inflation has stubbornly held the US economy in a tight chokehold for over a year now. Prices for everything have soared to heights unseen. Consequently, consumers have had to tighten their budgets and make considerable concessions on purchases, but good news may be on the way, according to Treasury Secretary Janet Yellen.
Yellen relayed in an interview that recently aired on CBS’s 60 minutes that she is hopeful that in 2023 consumers will see measurable economic deflation. To support her claim, Yellen cited how gas prices have eased considerably in recent weeks. She also commended the Federal Reserve’s rate hikes, highlighting that the agency is keenly aware of what happened to the economy during the 1970s and early 1980s and that they are doing everything in their power to avoid a situation like that from occurring again.
That said, Yellen did admit that there are still mitigating and unforeseen circumstances that could prevent relief from occurring in early 2023. She said that economists severely underestimated the effects that global factors (like the ongoing war in Ukraine) would have on the US economy. Thus, although she remained optimistic about the economic outlook for next year, she did not dismiss any potentials that could erupt unforeseen.
Meanwhile, the Federal Reserve remains committed to hiking interest rates. The agency still believes that its strategy will result in a soft landing for the economy. Simply put, the Federal Reserve is adamant that it can deflate the economy without plunging the nation into a full-blown recession.
However, despite Yellen and the Federal Reserve’s belief that, for all intent and purposes, things are looking up for 2023, the rest of the nation (namely business leaders) remain skeptical. Tech companies, whose successes and failures are often considered a good barometer for how healthy the economy is, have been noticeably struggling in recent months. Corporate giants like Meta and Microsoft have had to lay off employees by the hundreds and even thousands.
Tech giants aren’t the only ones laying off employees. Corporations in every sector and employees at every level are experiencing layoffs. Twitter, Netflix, and 7-Eleven are just a few examples that highlight the scale and breadth of the number of layoffs that are currently occurring nationwide.
Still, Yellen pointed out that even though, judging by the media, layoffs are widespread and abundant, unemployment is still hovering at the low rate of only 3.7%. Historically, a low unemployment rate is indicative of a strong and resilient economy. So even though a large margin of corporate entities are uneasy and outwardly concerned about a recession, those fears could be abated in 2023 if inflation cools and a recession is avoided.
Overall, Yellen honed in on many positive points that may be good indications that things will get better for consumers in 2023. That said, there are still uncertainties, and the fears of business leaders should not be discounted. When it comes down to it, the fate of inflation in 2023 will be revealed once the threshold separating this year from the new year is finally crossed.
