Former Federal Reserve Chair Janet Yellen doesn’t anticipate a recession in the next year, but cited two factors in why she thinks “odds of a recession are higher than normal,” CNBC reported.
Yellen pointed to growing wealth inequality and the US-China trade war as critical drivers of a potential downturn.
Both factors drag on consumer spending through higher prices from tariffs and diminished purchasing power. A drop in consumer spending can kick off an economic contraction as companies see revenue fall and subsequently cut jobs.
The former central bank chief also warned that the Fed may not have “as much scope” to keep the economy growing after its three rate cuts through 2019.
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Former Federal Reserve Chair Janet Yellen doesn’t expect a recession in 2020, but mentioned two drivers of a potential downturn in a Thursday speech, CNBC reported.
Though recession fears have subsided from their summer highs, there are still risks coming together, Yellen said. She pointed to wealth inequality and the US-China trade war as two key threats to the record-long economic expansion, and signaled that the converging risks are setting a dim tone for investors moving forward.
“I would bet there would not be a recession in the coming year,” the former central bank chief said at the World Business Forum. “But I would have to say that the odds of a recession are higher than normal and at a level that frankly I am not comfortable with.”
The growing wealth gap is keeping many Americans from reaping the benefits of economic expansion, and it’s leaving “a very substantial share of the US workforce feeling like they’re not getting ahead,” Yellen said. Greater wealth inequality can harm consumer spending and kick off a recession as companies earn less and subsequently cut jobs.
“It’s a serious …read more
Source:: Business Insider