Treasury Secretary Janet Yellen acknowledged Tuesday that she and Federal Reserve Chairman Jerome Powell “could use a better word” than “temporary” when describing the expected extent of inflation in the US economy. She added that she hopes the situation will deteriorate soon.
“I expect inflation to remain high although I very much hope it will now go down,” Yellen told the Senate Finance Committee during a hearing on the agency’s latest budget request. “I think reducing inflation should be our top priority.”
The Federal Reserve and the Treasury have been increasingly blamed by lawmakers and the public for allowing inflation to reach record levels – notably an 8.3% jump in consumer prices over the past year.
She told CNN last week that she did not fully understand the impact on the economy of large, unexpected shocks and supply bottlenecks.
“Look, I think I was wrong at the time about the path inflation would take,” she said.
The hearing was an opportunity for lawmakers to pressure Yellen on the causes of inflation, when it might go down and the administration’s plans to lessen the pain on Americans.
“We are now entering a period of transition from a period of historical recovery to one that can be characterized by stable and stable growth,” she said. “Making this transition is an essential part of the president’s plan to control inflation without sacrificing the economic gains we have made.”
As for Leylin and Powell’s earlier statements that the problem of inflation in the United States was temporary, Yellen allowed, “We both could have used a better word than temporary. There is no doubt that we have enormous inflation pressures. Inflation is really our biggest economic problem at this point.”
Inflation has shown signs of moderation but is likely to remain well above the Fed’s 2% target through the end of this year.
The Congressional Budget Office released an economic forecast this month saying that high inflation will continue into the next year, likely causing the federal government to pay higher interest rates on its debt.
The nonpartisan agency expects the CPI to rise 6.1% this year and 3.1% in 2023. These forecasts suggest that inflation will slow from current annual levels of 8.3%, yet remain significantly above the long-term baseline of 2.3%. .
Yellen was asked about her support for last year’s US bailout package, also known as ARP, which has been criticized by some economists who claim that the $1.9 trillion program has exacerbated price hikes.
Because inflation is high globally, Yellen said, “it cannot be the case” that ARP is largely responsible for the bulk of inflation in the United States.
Over the weekend, Yellen was forced to defend her support for the ARP after Bloomberg wrote about an excerpt from a biography about the minister saying she privately agreed with former Treasury Secretary Larry Summers “that a lot of government money was flowing into the economy too quickly and that’s why Its unsuccessful endeavor to cut the $1.9 trillion relief plan by a third in early 2021 before Congress approves the massive program.”
“I have never urged the adoption of a smaller US bailout package, and I believe the ARP has been central to driving robust growth throughout 2021 and beyond, as real US GDP growth has outpaced other advanced economies,” Yellen said in a statement on Saturday. Our recovery is faster compared to historical experience.”
Yellen said during the hearing that Congress should also have a role in lowering prices by enacting legislation that increases taxes on high net worth individuals — and by passing language for a global tax deal that has faltered in Congress, which was previously on the now dead list. Rebuild a better plan.
The Global Tax Deal is designed to subject large multinational corporations to a 15% tax rate wherever they operate. It would also tax a portion of the profits of the world’s largest companies in countries where they conduct business online but may not have a physical presence.
“With the prospects of recession and stagflation rising, this is not the time to consider raising taxes or reviving reckless spending from the House’s Better Rebuilding Plan,” Republican Senator Mike Crabo said.
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