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.”
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.”
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.
“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.
“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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