WASHINGTON– Treasury Secretary Janet Yellen acknowledged on Tuesday that she and Federal Reserve Chairman Jerome Powell “could have used a better word” than “transient” to describe the expected run of inflation in the U.S. economy. . She added that she hoped it would soon be on the decline.
“I expect inflation to stay high even though I really hope it’s going to come down now,” Yellen told the Senate Finance Committee during a hearing on the Senate’s latest budget request. ‘agency. “I think bringing inflation down should be our number one priority.”
The Federal Reserve and the Treasury Department have been increasingly blamed by lawmakers and the public for allowing inflation to reach record highs, including an 8.3% jump in consumer prices in course of the past year.
She told CNN last week that she did not fully understand the impact that large shocks and supply bottlenecks would have on the economy.
“Look, I think I was wrong then about the path inflation would take,” she said.
The hearing was an opportunity for lawmakers to press Yellen about the causes of inflation, when it might come down, and the administration’s plans to lessen the pain of Americans.
“We are now entering a period of transition from a historic recovery to one that can be marked by stable and steady growth,” she said. “This change is a central part of the President’s plan to get inflation under control without sacrificing the economic gains we have made.”
Regarding earlier statements by Yellen and Powell that the inflation problem in the United States was transitory, Yellen admitted, “We both could have used a better word than transitory. There is no doubt that we are under enormous inflationary pressures. Inflation is really our main economic problem at this point.
Inflation has shown signs of easing, but is expected to remain well above the Fed’s 2% target through the end of the year.
The Congressional Budget Office released an economic outlook this month indicating that high inflation will persist next year, which will likely force the federal government to pay higher interest rates on its debt.
The nonpartisan agency expects the consumer price index to rise 6.1% this year and 3.1% in 2023. This forecast suggests inflation will slow from current annual levels 8.3%, but would still be well above a long-term benchmark of 2.3%. .
Yellen was asked about her support for last year’s US relief package, also known as ARP, which has been criticized by some economists who say the $1.9 trillion program made the outbreaks worse. prices.
Because inflation is high globally, Yellen said, it “cannot be true” that the ARP is largely responsible for the bulk of US inflation.
Over the weekend, Yellen was forced to defend her support for ARP after Bloomberg penned an excerpt from an upcoming biography about the secretary that said she privately agreed with the former Treasury Secretary Larry Summers “that too much government money was pouring too quickly into the economy.” that’s why she had unsuccessfully sought to cut the $1.9 trillion relief package by a third in early 2021 before Congress passed the huge package.
Yellen said in a statement Saturday that “I never called for the passage of a smaller US bailout, and I believe the ARP has been pivotal in spurring strong growth throughout.” Throughout 2021 and beyond, U.S. real GDP growth is outpacing that of other advanced economies, and our labor market is recovering faster than historical experience.
Yellen told the hearing that Congress should also play a role in lowering prices by enacting legislation that raises taxes on wealthy people – and passing language for a global tax deal that has stalled in Congress. , previously included in the now dead Build Back Better Plan.
The Global Tax Agreement is designed to subject large multinational companies to a 15% tax rate wherever they operate. It would also tax some of the profits of the world’s largest companies in countries where they do business online but may not have a physical presence.
“As the outlook for recession and stagflation grows, now is not the time to consider raising taxes or resurrecting the reckless spending of the Build Back Better plan passed by the House,” said Republican Senator Mike Crap.