US growth needs to slow in line with potential due to full employment


According to Reuters, US Treasury Secretary Janet Yellen stated on Tuesday that given the economy was operating at full employment, US growth needed to slow to a rate more in line with its potential growth rate to bring inflation back to target levels.

Key quotes

“I think the Chinese would most likely use the policy space they have to try to avoid a slowdown with major proportions,”

“Growth has to slow to be in line with potential when you’re operating at full employment,”

“It’s completely natural and desirable, that growth, the pace of growth, is slowing.”

“There may be spillovers from China’s economic difficulties to the US”

“Demand-supply imbalances in US labor market have abated”

Market reaction

These comments do not seem to have a major influence on risk mood. As of writing, the US Dollar Index (DXY) is trading at 105.13, down 0.01% on the day.