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Yellen said economists who predicted high unemployment would be needed to keep inflation in check were "eating their words" and that the labor market and consumer demand remained firm.

Us Treasury Secretary Janet Yellen said on Tuesday that economists who predicted the US would need high unemployment to keep inflation in check are "eating their words" as the Labour market and consumer demand suggest little slack in the economy and inflation continues to cool.

"We see no signs of weakness in the labor market, which is a common cause of recession fears," Yellen told reporters during a trip to Mexico City.

"The economists who said you need very high unemployment to achieve your inflation target are starting to eat their words, as if you don't need to push unemployment up to control inflation at all," she said.

The Labor Department is scheduled to release October nonfarm payrolls data on Friday, an important factor in determining whether Fed policymakers keep interest rates on hold or start considering easing monetary policy.

The unemployment rate edged up to 3.9 percent in September as job growth slowed, and Tuesday's job openings data showed the labor market cooling further, with 1.34 job openings for every unemployed person in October, the lowest level since August 2021 and down from 1.47 in September.

Yellen also noted that consumer demand, an important pillar of the U.S. economy, remains strong. Demand, she said, is still enough to "push the economy forward at a trend-like pace." Trend growth rate is the long-term growth rate that an economy can achieve without inflation.

Driven by strong investment in factories, warehouses and equipment and strong consumer demand, the US economy grew at an annualised rate of 5.2% in the third quarter, the highest pace since the fourth quarter of 2021.

Ms. Yellen did not specify what level of growth in demand could be sustained for now. Many economists believe the U.S. is growing at an average annual non-inflationary rate of about 1.8 percent, but Yellen believes federal investments in infrastructure, semiconductors and clean energy technology are boosting its productive capacity.

Separately, referring to the drying up of aid funds for Ukraine, Yellen said U.S. lawmakers hold the fate of Ukraine in their hands and have blocked the Biden administration from providing $61 billion in new funding to the troubled Eastern European country.

"The situation is dire and if we are unable to provide this money to Ukraine, we will be responsible for Ukraine's failure," Ms Yellen told reporters.

She said Ukraine is spending all of its tax revenues on military defense, while keeping schools and hospitals open and other services operating depends largely on U.S. funding. According to the White House, current U.S. aid funding will run out at the end of the year.

Republicans insist they will agree to a new aid package only if Democrats and the White House make major concessions on immigration policy to stem the surge of migrants at the U.S. border with Mexico. With negotiations stalled, Ukrainian President Volodymyr Zelensky on Tuesday canceled plans to address the U.S. Senate via video conference.

Since the outbreak of the Russia-Ukraine conflict in February 2022, the United States has provided tens of billions of dollars in military and non-military aid to Ukraine.