Commerce Secretary Gina Raimondo on Sunday said she understands that Americans feel frustrated with rising prices at fuel pumps and grocery stores, but insisted that the U.S. economy is fundamentally “very strong” and can avoid a recession.
Speaking on ABC’s “This Week,” Raimondo said it’s normal for the Federal Reserve to hike interest rates to return the economic growth, which is recovering from the depths of the pandemic, to a “more steady” level.
“I do think at some point, we will see a less rapid growth in the economy, but I don’t see any reason to think that we will have a serious recession,” Raimondo said. “We recovered all the jobs since the pandemic. People’s household balance sheets are strong. Companies are doing well. Companies are hiring. Companies are growing.”
While the unemployment rate held at 3.6 percent over the past four months and the number of unemployed people largely unchanged at 5.9 million, the inflation rate has remained at record highs, with the consumer price index climbing 8.6 percent in May from a year ago.
In response, the Fed in mid-June raised its benchmark interest rate by 0.75 percentage points, marking the biggest hike since 1994. This was after a quarter-point rise in March and a half-point increase in May.
According to Raimondo, the CEO of “a major U.S. company” recently told her that the fear of a recession could turn into a self-fulfilling prophecy.
“It’s almost like we’re trying to talk ourselves into a recession,” she said. “He said he sees no signs of it. His customers, both individual and companies, are buying. So the fundamentals of this economy are very strong.”
When asked to explain the disconnection between the “strong economic fundamentals” and low consumer confidence, Raimondo blamed inflation.
“If you ask folks what they’re worried about, they’ll either say grocery store prices are high, food prices are high, energy prices, gas prices, that’s in people’s daily lives, right?” she said. “So every day you’re confronted with these high prices. It’s hard on folks.”
On Friday, the national average price for a gallon of gasoline fell by 3.1 cents to $4.721 after surpassing $5 in mid-June, according to auto organization AAA. A year ago, the national average was just $3.13, representing a 50 percent year-over-year spike in the price of gas.
“You’re starting to see gas prices come down, wholesale gas prices are coming down,” Raimondo said. “But until we do get a handle on inflation, I think it’s natural for a family to be feeling that pinch.”