Yellen Says She Regrets Pushing the ‘Transitory’ Inflation Narrative as Price Pressures Tick Up

Treasury Secretary Janet Yellen has expressed regret for repeating the ’transitory' inflation mantra in 2021.

Treasury Secretary Janet Yellen speaks at an event on the Biden Administration’s economic strategy toward the Indo-Pacific in Washington on Nov. 2, 2023. Madalina Vasiliu/The Epoch Times

A day after the latest inflation data came in hotter than expected, Treasury Secretary Janet Yellen said the path to relieving price pressures will be bumpy and expressed regret for being one of many Biden administration officials who repeatedly insisted that inflation would be “transitory.”

The consumer price index (CPI), a measure of retail inflation, came in at a 3.2 percent in February, above consensus estimates and up from 3.1 percent in the prior month, according to data released on March 12 by the Bureau of Labor Statistics (BLS).

The latest data brings the cumulative inflation since President Joe Biden took office in January 2021 to roughly 19 percent. However, alternative CPI measures, like the ShadowStats gauge that uses the same methodology the U.S. government used in the 1980s, estimate that the actual pace of inflation is nearly twice as high.

Inflation shot up sharply in the months following President Biden’s inauguration, climbing from 1.7 percent in February 2021, his first full month in office, to 4.2 percent in April, and then to 7.2 percent in December.

Despite numerous expert warnings that inflation would prove stubbornly persistent, Ms. Yellen and other members of the Biden administration sought to allay concerns, vocalizing a chorus of opinions through 2021 that inflation would be a “transitory” phenomenon.

Despite all the “transitory” talk, inflation continued to climb, hitting 8.6 percent in March 2022, when the Federal Reserve finally decided enough was enough and started hiking interest rates. Federal Reserve Chair Jerome Powell would later acknowledge that rates should have gone up sooner.

Since the Fed embarked on its most aggressive rate-hiking cycle since the 1980s, inflation has come down off the June 2022 peak of 9 percent, though recent data shows price pressures remain elevated—still substantially above the Fed’s 2 percent target.

Following the release of the latest price data, Ms. Yellen expressed regret for her earlier insistence that inflation would be “transitory.”

“I regret saying it was transitory,” Ms. Yellen said in a March 13 interview on Fox News. “It has come down. But I think transitory means a few weeks or months to most people.”

Bumpy Ride

While Ms. Yellen’s remarks are noteworthy, especially in light of the fact that data shows price pressures ticking up again, it’s not the first time she’s expressed regret for calling inflation “transitory.”

Shortly after December 2023 inflation data was released in January 2024, which showed an uptick in inflation after a multi-month falling trend, Ms. Yellen made a similar admission in an interview with WBUR.

“Inflation has come down,” she said at the time. “I think the word transitory suggests to many people that it’s something that’s a matter of days or weeks. And in our economy, it lasted for over a year. So I regret using the word transitory.”

The persistence of inflation has led to worries about stagflation, a toxic brew of sluggish growth, high unemployment, and elevated price pressures. A number of economists have, over the past several years, issued warning after warning about stagflation, with some even sounding the alarm over a “stagflationary debt crisis.”

While those fears have so far failed to materialize, a JPMorgan analyst recently expressed stagflationary concerns, warning that, in another year of high government spending, “it wouldn’t be a surprise that inflation may stop declining or move higher.”

In the Fox interview, Ms. Yellen was asked about the resurgent fears of stagflation, given that any progress on bringing down inflation seems to have stalled.

“I don’t think we’re going to see stagflation,” Ms. Yellen said. “Most forecasters believe we’re on a path where inflation will come down over time.”

U.S. President Joe Biden, flanked by Secretary of State Antony Blinken (L) and Treasury Secretary Janet Yellen (R), hosts a meeting inside the Cabinet Room at the White House in Washington on Oct. 20, 2023. Tom Brenner/Pool/Getty Images

She predicted that the single biggest contributor to inflation, namely the cost of rental housing, would move down this year. Still, perhaps informed by the hindsight of her inaccurate “transitory” inflation call, Ms. Yellen cautioned that the path towards normalcy would be bumpy.

“I wouldn’t expect this to be a smooth path month to month, but the trend is clearly favorable,” she told Fox.

President Joe Biden’s “top priority” is addressing inflation, she insisted.

Her remarks come shortly after President Biden put forward a $7.3 trillion election-year budget—a 4.7 percent increase over the previous year.

House Speaker Mike Johnson (R-La.) was quick to criticize the proposal, saying it reflected an “insatiable appetite for reckless spending” and a “disregard for fiscal responsibility.”

Recent polling from Reuters/Ipsos shows that 40 percent of voters think former President Donald Trump would handle the economy best, compared to 31 percent who believe President Biden would do better on economic issues.