Ex Treasury Secretary Steven Mnuchin Says America’s in a Recession That Will Continue for Years

U.S. Treasury Secretary Steve Mnuchin speaks to the media after meeting with the U.S. Senate Minority Leader and House Speaker on coronavirus relief at the U.S. Capitol in Washington, on Aug. 7, 2020. (Mandel Ngan/AFP via Getty Images)

Former U.S. Treasury Secretary Steve Mnuchin has weighed in on the recession debate, stating that he believes the United States is already in the midst of an economic downturn that will continue for the next two years.

Speaking at Saudi Arabia’s Future Investment Initiative (FII) conference in Riyadh on Wednesday, Mnuchin, who served under President Donald Trump's administration from 2017 to 2021, said he expects 10-year Treasury yields, the most followed benchmark for interest rates, to peak at 4.5 percent.

The 10-year Treasury yield is currently at 4.067 as of 12:37 p.m. GMT on Oct. 26 after hitting its highest level since 2008 at 4.23 percent last week on the back of the Federal Reserve's rate hikes in an attempt to bring down inflation.

"I think you are going to see inflation in the U.S. begin to come under control and it will probably be a two-year period," he said, according to BNN Bloomberg.

"But you’re going to begin to see that tightening relatively regularly," he added, referencing the Central Bank's monetary policy. "And I think people are overestimating the Federal Reserve’s actions just as they underestimated it."

Elsewhere, Mnuchin said that the United States and China must learn to "co-exist" while noting that the latter, which is the world's second-largest economy, is set to experience a significant slowdown that will have a knock-on effect on the rest of the world.

China's Slowdown Will Impact World Economy

"Clearly China is going to have a significant slowdown and that will have an impact on the world economy," said Mnuchin. "Things are going to get worse before they get better."

The former treasury secretary, who is now managing partner at the private equity investment firm, Liberty Strategic Capital, also said he believes that economic issues in the Middle East should be dealt with regionally.

Numerous experts have in recent months stated that the United States is in a recession after the economy contracted for two consecutive quarters this year. The Biden administration has continued to insist that the economy is strong enough to avoid one.

Mnuchin's comments differ from those of Secretary of the Treasury Janet Yellen, who on Monday said she expects inflationary pressures to ease "over the next year or two," although she stressed that she is "not positive" that cost of living crisis will not get worse before it gets better.

"I don’t want to forecast month-by-month inflation numbers," Yellen told NBC News. "The most recent data suggest we still have inflation that’s unacceptably high, but there are good indications earlier in the pipeline that inflation will come down."

"I have confidence that inflation will come down over the next year or two, so I believe that what [the Federal Reserve is] doing will work," she added.