Possibility of ‘large’ economic shocks in future, Yellen warns

US Treasury Secretary Janet Yellen said Thursday the global pandemic and Russia’s invasion of Ukraine highlight the possibility of big economic shocks in the future, adding that downturns are “likely to continue to challenge the economy”. With “large negative shocks” inevitable, she said, policymakers have learned from the Great Recession that it’s imperative to exit economic downturns “as quickly as possible”. “Improved understanding of breaks in supply chains, increases in commodity prices, bursting of asset bubbles, and labor and productivity shocks can help policymakers implement reforms that bolster our economic resilience.” The past several years have been marked by a worldwide pandemic that prompted both the Trump and Biden administrations to issue trillions of dollars in federal stimulus aid, which economists have said contributed to inflation levels at their highest points in four decades. Yellen called for more permanent housing safety assistance for renters and homeowners and applauded recent improvements to the unemployment insurance system and stimulus payments, stressing the importance of US “recovery policies that shorten the duration of recessions and mitigate economic pain.” She promoted the Biden administration’s efforts to reduce US reliance on fossil fuels and push for greater energy independence.