‘I Think I Was Wrong’ and ‘Didn’t Fully Understand’ Inflation: Treasury Secretary Janet Yellen

‘I Think I Was Wrong’ and ‘Didn’t Fully Understand’ Inflation: Treasury Secretary Janet Yellen
President Joe Biden meets with Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen in the Oval Office at the White House in Washington on May 31, 2022. (Kevin Dietsch/Getty Images)
Naveen Athrappully

Treasury Secretary Janet Yellen admitted in an interview with CNN that her past views on how inflation in the United States would progress were faulty.

Yellen, along with Federal Reserve officials, had previously insisted that inflation was temporary. However, with inflation now near four-decade highs, many have been forced to change their stance on the matter.

“I think I was wrong then about the path that inflation would take,” Yellen said in the May 31 interview.

“As I mentioned, there have been unanticipated and large shocks to the economy that have boosted energy and food prices and supply bottlenecks that have affected our economy badly that I didn’t—at the time, didn’t fully understand, but we recognize that now.”

Pointing out that America is currently in a period of transition, Yellen said she is not expecting to see the robust economic growth and job creation that the United States had enjoyed during the post-pandemic recovery period. Instead, the focus of the administration will be on stable growth and bringing down inflation.

In an interview with CNBC in March, Yellen had predicted that the annual inflation rate would remain “very uncomfortably high” over the next year.

The 12-month Consumer Price Index (CPI), a measure of inflation, was recorded at a forty-year high of 8.5 percent in March. A month later, inflation continued to remain high at 8.3 percent.

Yellen took part in the May 31 meeting between President Joe Biden and Fed Chairman Jerome Powell.

According to the Treasury Secretary, the president said during the meeting that he “believes strongly” in the independence of the Fed to take steps necessary to lower inflation. The president knows what a “huge burden” inflation is on American households, Yellen stated.

Prior to meeting with Powell, Biden had said in a statement that addressing inflation was his “top priority.”

Highlighting the independence of the Fed, the president said that he was not going to interfere in its “critically important work.” The Fed has dual responsibilities, that of “full employment” and “stable prices,” Biden pointed out.

“Chair Powell and other leaders of the Fed have noted, at this moment, they have a laser-focus on addressing inflation, just like I am,” Biden said.

“And with a larger complement of board members now confirmed, I know we’ll use those tools of monetary policy to address the rising prices for the American people.”

Cecilia Rouse, chair of the White House Council of Economic Advisers, also admitted in a recent interview with CNN that Washington had incorrectly predicted that inflation wouldn’t be a long-term issue.

In addition to the pandemic, unforeseen events like Russia’s attack on Ukraine and the Delta and Omicron COVID-19 variants disrupted “getting us back to equilibrium,” she said. However, she is still optimistic and expects inflation to ease “over the coming months.”

Rep. Bill Johnson (R-Ohio) has blamed the Biden administration for being responsible for inflation due to its flawed energy and economic policies.

The “massive amounts of money” that the administration has pumped into the economy has devalued the dollar and made things more expensive, Johnson said in an interview with NTD.
A report published in May by the Congressional Budget Office (CBO) predicts inflation will remain elevated in 2022 at 4 percent, which is double the Fed’s target rate of 2 percent.

In 2023 and 2024, the CBO expects inflation to decline due to slower growth in the price of goods that will “more than offset” the rise in the prices of services, reduction in supply chain disruptions, and actions taken by the Federal Reserve to bring down inflation.

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