Hugh Johnson Advisors Chief Economist Hugh Johnson and Meridian Equity Partners Senior Managing Partner Jonathan Corpina discuss how investors should play Fed rate hikes in The Claman Countdown.
As the Federal Reserve hikes interest rates to their highest levels since the 2008 financial crisis, the White House is trying to figure out a way to fight inflation without plunging the country into a full-blown recession.
“I believe there is a way,” Treasury Secretary Janet Yellen told Atlantic on Thursday. “I think of a full recession as a time when there is excessive unemployment. They don’t have a strong job market. We currently have one of the tightest labor markets.”
Yellen predicts that inflation will finally be under control next year.
“There are risks. The Russian invasion of Ukraine is not over yet. We see Putin weaponizing oil and gas,” Yellen said. “We will remain vulnerable to supply shocks.”
YELLEN SAYS FED CAN TAME INFLATION WITHOUT CRUCING JOBS
Janet Yellen delivers a press conference at the US Treasury Department’s cash room on July 28, 2022 in Washington. (Portal/Jonathan Ernst / Portal Photos)
Yellen is keeping an eye on the distribution of Russia’s oil reserves on the world market while the US tries to consolidate its energy capacities.
“Russia is now very actively looking for places to sell its oil. They are giving huge discounts to China and India, which have been two big buyers,” Yellen said.
Beijing remains a stumbling block in building a clean energy future, even as the bipartisan CHIPS law inspires more confidence in domestic semiconductor manufacturing.
“There are rare earths, solar panels, batteries, electric battery components that we’re really too dependent on China for,” Yellen said.
President Biden signs the CHIPS and Science Act of 2022 on the South Lawn of the White House in Washington on August 9, 2022. (Demetrius Freeman/The Washington Post via Getty Images/Getty Images)
According to Yellen, to create a smooth transition to clean energy, the US must ensure that “communities that are, and have been, dependent on fossil fuels are not left behind”.
Biden has earmarked a record $360 billion for climate action under the Inflation Reduction Act. The White House must now propose a green energy transition to the entire nation.
FEDERAL RESERVE RAISES INTEREST RATES BY 75 BAPS FOR THIRD CONSECUTIVE MONTH
“This is important because I really think that the fact that the coasts in particular are enjoying rapid growth has contributed to the polarization in the country,” Yellen said. “Of course, with rising real estate prices in these areas, they don’t have it that easy.”
President Biden and the White House COVID-19 Response Team participate in a virtual call with the National Governors Association from the South Court Auditorium of the Eisenhower Executive Office Building of the White House Complex on December 27, 2021. (Kent Nishimura/Los Angeles Times via Getty Images/Getty Images)
Mortgage rates have doubled over the past year and the 30-year fixed-rate mortgage is above 6% for the first time since 2008.
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According to a new Fox News poll, 78% of voters say inflation has caused financial difficulties. 59 percent of voters are also “extremely” concerned about inflation and higher prices.
As the Federal Reserve warns that Americans will have to endure a rise in unemployment and higher interest rates, it’s a waiting game before consumers feel economic relief.