Treasury Secretary Janet Yellen expects inflation — currently at 7% — to fall back to 2% in the coming months.
With inflation rising to unprecedented heights in the last few months, many are turning to lawmakers for answers on why their dollar is not stretching to buy as many diapers or bacon.
Defending the economic strategy that President Joseph Biden undertook in the last year, Treasury Secretary Janet Yellen said that she expects inflation — currently at 7%, a high unseen since 1982 — to improve as the economy emerges out of the pandemic.
Why Are Things So Expensive?
“I expect inflation throughout much of the year – 12-month changes – to remain above 2%,” Yellen said at a live interview for CNBC’s “Closing Bell.”
“But if we’re successful in controlling the pandemic, I expect inflation to diminish over the course of the year and hopefully revert to normal levels by the end of the year around 2%.”
Citing factors like supply chain disruption and high levels of unemployment over the last year, Yellen said that inflation is already poised to decrease as omicron case counts once again go down.
The fact that the labor market has been rebounding dramatically — the economy added 6.4 million jobs in 2021 — is helping reverse that trend.
“I think it has to be viewed as a remarkable success that the unemployment has fallen the most in a year in American history,” Yellen said.
She expects that Biden’s Build Back Better Program, a bill that would put $1.75 trillion toward things like social welfare and Covid-19 relief, will improve it further. Similar statements have made when Biden himself was questioned on rising prices.
What Can The Fed Do In All This?
“Inflation rose by more than most economists, including me, expected and of course it’s our responsibility with the Fed to address that,” Yellen said. “And we will.”
When inflation is high, the common move is for the Federal Reserve to raise borrowing rates — talk of just when and how often this will happen are reaching fever-pitch levels among economists. Yellen said that it is up to the Fed, currently headed by Jerome Powell, to “recalibrate” the equation and keep prices at bay whichever way it can.
“We have been hit by a pandemic that has created economic challenges that none of us anticipated and it is our hope and intention to bring inflation down to levels that are consistent with the Fed’s interpretation of price stability,” Yellen said.
