Secretary Of the treasury Janet Yellen stated she anticipates strong price increases over the first half of 2022, but dismissed claims that the US is losing control of inflation.
Inflation is likely to drop in the second half as supply constraints, a tight labor market, and other pandemic-related variables improve, according to Yellen on CNN’s “State of the Union” on Sunday. She described the current scenario as “temporary” suffering.
“I don’t believe we’re about to lose control of inflation,” Yellen said, rebutting former Treasury Secretary Lawrence Summers’ remark earlier this month.
“Inflation has not been this high in the United States in a long time. Expect it to stop as we return to normal.”
On Friday, Federal Reserve Chair Jerome Powell expressed increased anxiety about persistently high inflation, indicating that the central bank may begin decreasing its bond purchases soon but will take its time raising interest rates.
The S&P 500 Index fell for the first time in eight days, as benchmark Treasuries surged, sending 10-year rates to their lowest level in over two months. Inflation expectations are still strong the 10-year break-even rate of 2.64 percent is just 15 basis points below the 2005 high and rates traders are betting the Fed will raise rates at least once this year.
Powell claimed that policies are “well-positioned” to deal with a variety of outcomes.
Yellen remained tight-lipped about how she recommended President Joe Biden on whether or not to re-appoint Powell. She did say, though, that financial regulation was “much reinforced” during Powell’s term, as it had been during hers and that of her predecessor, Ben Bernanke.
Yellen stated as the epidemic piled stress on the financial markets, “the heart of our financial system functioned quite well because of advances in capital liquidity, risk management, and stress testing,” Yellen said. “And those improvements have lasted throughout Powell’s presidency.”
As economic reopening fuel a boom in demand, supply chain hitches have bedeviled the United States and other countries.
The Federal Reserve has pledged to maintain its target overnight rate of interest around zero until the economy has restored to normal employment and inflation has achieved the central bank’s 2% target and is expected to be substantially above that level for some time.
She also stated that raising the US debt ceiling is “very necessary,” citing previous concerns about the ramifications of a potential US default.
As pandemic-relief spending kept the federal government’s high borrowing needs afloat, the United States produced the second-largest annual budget deficit on record in 2021.
According to a Treasury Department report released this week, the deficit for the fiscal year through September was $2.77 trillion, down from $3.1 trillion the previous year. The deficit shrank to 12.4 percent of GDP in the fiscal year, down from 15 percent in 2020 — the highest level since World War II.
“It’s just housekeeping, doing what we need to do to pay our bills,” she said.
“I am confident that it will be completed.”