Treasury Secretary Yellen Expects ‘Several More Months’ of Inflation Before Decline
Treasury Secretary Janet Yellen said she anticipates the economy to go through “several months of rapid inflation,” according to an interview with CNBC yesterday.
“We will have several more months of rapid inflation,” Yellen told CNBC. “So I’m not saying that this is a one-month phenomenon. But I think over the medium term, we’ll see inflation decline back toward normal levels. But, of course, we have to keep a careful eye on it.”
Yellen’s remarks followed the Labor Department’s release of its Consumer Price Index earlier this week, showing the largest 12-month increase since a 5.4% jump for the period ending August 2008.
The CPI, which measures what consumers pay for goods and services, including clothes, groceries, restaurant meals, recreational activities and vehicles, saw a 0.9% increase in June, the largest 1-month change since June 2008 when the index rose 1%, according to a release.
Used cars and trucks continued to rise sharply, their index increasing 10.5% in June while the food index increased 0.8% in June, a larger increase than the 0.4% increase reported for May. The gasoline index rose 2.5%.
While Yellen said that “she is encouraged by market-based measures that suggest prices will cool over the longer term,” according to CNBC, she added that she is concerned about the impact on lower-income homebuyers at a time when housing prices are soaring.
Yellen’s remarks also came on the heels of Federal Reserve Chair Jerome Powell’s remarks before the Committee on Financial Service earlier this week, who also said that inflation has increased notably and will likely remain elevated in coming months before moderating.
“Inflation is being temporarily boosted by base effects, as the sharp pandemic-related price declines from last spring drop out of the 12-month calculation,” he told the Committee. “In addition, strong demand in sectors where production bottlenecks or other supply constraints have limited production has led to especially rapid price increases for some goods and services, which should partially reverse as the effects of the bottlenecks unwind. Prices for services that were hard hit by the pandemic have also jumped in recent months as demand for these services has surged with the reopening of the economy.”
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