Surveyed economists now see a 30% chance of a recession over the next year, down from 35%.
The Treasury secretary said the her rate projections reflect "current market realities."
The revisions to the consumer price index last year were large enough to cast doubt on overall inflation progress.
Property owners have come under pressure due to soaring borrowing costs, raising concerns about defaults.
The Biden administration would seek to retain cuts for those earning less than $400,000, she said.
“Wage increases are running over price increases now,” she said.
The Treasury secretary added that she doesn't believe the Fed will need to push as harshly in lowering inflation.
Her comments come days after President Joe Biden blasted China's economic problems as a “ticking time bomb.”
Receding inflation has prompted economists and investors to reassess recession risks.
Bank of America has estimated the issuance wave could have the same impact as a quarter-point interest-rate hike.