Yellen Saw Economy at ‘Brink of Recession’ in January 2008

Other Fed staffers disagreed that economy was in downturn at the time

Feb. 21 (Bloomberg) — Janet Yellen saw the U.S. economy “at, if not beyond, the brink of recession” in January 2008, according to transcripts of Federal Reserve policy meetings released Friday.

Yellen, president of the San Francisco Fed at the time and now Federal Reserve chairwoman, disagreed with the Fed staff, which reported at the January meeting that the economy wasn’t in a recession, though the likelihood of a downturn was increasing.

Yellen said deteriorating credit conditions and a slowdown in the labor market were likely to weigh on economic growth.

“Delinquencies and charge-offs on most forms of consumer debt have already risen, and slower job growth seems likely to exacerbate this trend, prompting financial institutions to further tighten credit standards and terms,” she said at the Jan. 29-30, 2008, meeting of the Federal Open Market Committee. “In my forecast, such developments reverberate back negatively onto economic activity.”

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