Yellen Regrets Deeming Inflation ‘Transitory,’ Ups to ‘Unacceptable’ — How She Suggests Congress Can Help

Mandatory Credit: Photo by MATT MCCLAIN/POOL/EPA-EFE/Shutterstock (12475212d)United States Secretary of the Treasury Janet Yellen appears before the Senate Banking, Housing and Urban Affairs Committee with Chair of the Federal Reserve Jerome Powell at the Hart Senate Office Building in Washington, DC, USA, 28 September 2021.
MATT MCCLAIN/POOL/EPA-EFE/Shutterstock / MATT MCCLAIN/POOL/EPA-EFE/Shutterstock

U.S. Treasury Secretary Janet Yellen, who not too long ago called inflation a “transitory” problem that would eventually work itself out, offered a far grimmer assessment during a Congressional hearing on Tuesday, saying the United States is facing “unacceptable levels of inflation.”

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The hearing with the Senate finance committee was supposed to focus on President Joe Biden’s budget for fiscal year 2023, the Guardian reported. But Yellen was also asked to address inflation — including her previous comments that inflation would be transitory.

“When I said that inflation would be transitory, what I was not anticipating was a scenario in which we would end up contending with multiple variants of COVID that would be scrambling our economy and global supply chains,” Yellen told the committee. “I was not envisioning impacts on food and energy prices we’ve seen from Russia’s invasion of Ukraine.”

She added that she and Federal Reserve Chairman Jerome Powell “could have used a better term than ‘transitory’,” and that the United States faces “unacceptable levels of inflation.”

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U.S. inflation in April rose 8.3% year over year. Although that represented a slowdown from the previous couple of months, the inflation figures for 2022 are still the highest in more than 40 years. May’s inflation figures are due to be released June 17.

The Fed aims to tame higher prices through a series of interest-rate hikes this year, but a growing number of economists sound doubtful that historically high inflation will be going away anytime soon. There has also been increasing chatter that a recession is imminent, though not everyone believes that’s a foregone conclusion.

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“Employment in the U.S. is signaling that we are nowhere near recession. However, historically, employment is a lagging indicator of impending economic stress,” Lauren Goodwin, an economist and portfolio strategist at New York Life Investments, said in an email statement to GOBankingRates.

She added that economic components that reflect tightening financial conditions, such as housing, “tend to be an early warning sign.” The next signs are business indicators like new orders and durable purchases, followed by direct business profits.

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“Each of these are still strong, and likely to remain so for another few quarters,” Goodwin wrote.

In terms of reining in inflation, Yellen told the hearing “there’s a lot Congress can do to ease the cost burdens that households are experiencing.”

She specifically pointed to federal programs that would lower prescription drug costs, invest in clean energy and affordable housing, and help families with child care expenses and medical costs, CNN Business reported.

“There’s no question we have huge inflation pressures,” Yellen said. “Inflation is our top economic problem at this point. It’s critical that we address it. I do expect inflation to remain high, although I very much hope it will be coming down.”

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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