Treasury Secretary Janet Yellen says US faces ‘unacceptable levels’ of inflation


Treasury Secretary Janet Yellen says U.S. faces ‘unacceptable levels’ of inflation and calls on Congress to act as Republicans grill her on admitting she was ‘wrong’ about predicting the highest price hike in 40 years

  • Yellen said Tuesday the U.S. faces ‘unacceptable levels’ of inflation, after last week admitting she was wrong about how long the price hikes would last
  • To tamp down price hikes, the federal government needed an ‘appropriate’ budget, coupled with tightening monetary policy at the Fed, she said 
  • The secretary offered slim hope that inflation would regulate any time soon
  • ‘I do expect inflation to remain high, although I very much hope that it will be coming down now,’ she said

Treasury Sec. Janet Yellen said Tuesday the U.S. faces ‘unacceptable levels’ of inflation, after last week admitting she was wrong about how long the price hikes would last. 

‘We currently face macroeconomic challenges, including unacceptable levels of inflation, as well as the headwinds associated with the disruptions caused by the pandemic’s effect on supply chains, and the effects of supply side disturbances to oil and food markets resulting from Russia‘s war in Ukraine,’ she said at a hearing of the Senate Finance Committee Tuesday. 

In order to tamp down price hikes, the federal government needed an ‘appropriate’ budget, coupled with tightening monetary policy at the Federal Reserve, according to Yellen. She added that President Biden’s budget request for FY 2023 would meet the moment. 

The secretary offered slim hope that inflation would regulate any time soon. 

‘I do expect inflation to remain high, although I very much hope that it will be coming down now,’ she said. The Fed aims to keep inflation at 2 percent per year. 

Yellen made waves last week by admitting she’d been wrong on inflation. 

Treasury Sec. Janet Yellen said Tuesday the U.S. faces 'unacceptable levels' of inflation, after last week admitting she was wrong about how long the price hikes would last

Treasury Sec. Janet Yellen said Tuesday the U.S. faces ‘unacceptable levels’ of inflation, after last week admitting she was wrong about how long the price hikes would last

Inflation in the US hit 8.3 percent in April, falling slightly from the four-decade high it reached in March and breaking a streak of seven consecutive monthly increases in the annual rate of price increases

Inflation in the US hit 8.3 percent in April, falling slightly from the four-decade high it reached in March and breaking a streak of seven consecutive monthly increases in the annual rate of price increases 

‘I think I was wrong then about the path that inflation would take,’ she acknowledged to CNN in an interview.

Biden last summer said price increases were temporary. Interviewer Wolf Blitzer played back clips of Yellen in the past saying ‘I think there’s a small risk and I think it’s manageable’ and ‘I don’t anticipate that inflation is going to be a problem.’

‘To dampen inflationary pressures without undermining the strength of the labor market, an appropriate budgetary stance is needed to complement monetary policy actions by the Federal Reserve,’ Yellen said at Tuesday’s hearing. 

She said that Biden’s 2023 budget proposal included ‘smart, fiscally responsible investments, cutting deficits and keeping the economic burden of debt low.’

The Consumer Price Index is up 8.3 percent this April over last and inflation is running at its highest rate in 40 years. 

For months both Yellen and Federal Reserve Chair Jerome Powell insisted that inflation would be ‘transitory.’

Yellen said Tuesday: ‘When I insisted that inflation would be transitory, what I was not anticipating was a scenario where which we would end up contending with multiple variants of Covid that would be scrambling our economy and global supply chain and I was not envisioning impacts on food and energy prices we’ve seen from Russia’s invasion of Ukraine. So Mr. Powell indicated himself both of us could probably have used a better term than transitory.’

Gas prices are now up to $4.92, more than double what they were when Biden took office, creating a drag on the commander-in-chief’s poll numbers that further threatens Democrats ahead of the midterm elections. 

Over the past year, grocery prices have shot up 10.8 percent, the largest such year-over-year increase since 1980. Food away from home was up 7.2 percent from a year ago.

At the hearing, Yellen pushed back against Republican concerns that inflation could have been exacerbated by the $1.9 trillion American Rescue Plan Democrats passed in 2021. 

Sen. Steve Daines asked Yellen if she agreed with the San Francisco Federal Reserve Bank’s assessment that the American Rescue Plan had a ‘significant causal effect’ on inflation. 

Sen. Steve Daines asked Yellen if she agreed with the San Francisco Federal Reserve Bank's assessment that the American Rescue Plan had a 'significant causal effect' on inflation

Sen. Steve Daines asked Yellen if she agreed with the San Francisco Federal Reserve Bank’s assessment that the American Rescue Plan had a ‘significant causal effect’ on inflation

‘We’re seeing high inflation in almost all of the developed countries around the world. And they have very different fiscal policies,’ Yellen said. ‘So it can’t be the case that the bulk of the inflation that we’re experiencing reflects the impact of the ARP.’ 

Yellen further explained that Biden had ‘inherited an economy with very high unemployment.’

‘We had to address the possibility that this could be a downturn that could match the Great Recession,’ the secretary said, explaining the need for the massive stimulus package. 

‘If there was a forecaster that was worried about the high unemployment rates that forecaster was, I think, massively off,’ Daines said. 

The unemployment rate is currently at 3.6 percent, down from 6.4 percent when Biden took office. 

Yellen also urged Congress to do more to fight inflation.  

‘Congress can do a lot to mitigate some of the most important and burdensome costs that households face,’ Yellen said, pointing to prescription drug prices, improving access to affordable housing and investments in renewable energy. 

‘It’s virtually impossible for us to insulate ourselves from the shocks like the ones occurring in Russia that move our oil prices,’ Yellen said, noting that energy prices were up all across the globe. ‘The critical thing is we become more dependent on the wind and the sun,’ urging clean energy investments. 

While his $1.8 trillion Build Back Better plan was tanked by Sen. Joe Manchin due to inflation concerns, Biden is still pushing for a scaled-back climate and social spending plan that would address prescription drug prices and clean energy investments.  

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