Janet Yellen, the US Treasury Secretary, admitted that she was “wrong” last year about the threat posed by rising inflation, while insisting that the Joe Biden administration was quick to focus on taming rising prices.
“I think I was wrong then about the path that inflation will take,” Yellen told CNN on Tuesday, rarely admitting a mistake by a senior US official.
“There have been unexpected and major economic upheavals that have raised energy and food prices and supply bottlenecks that have hurt our economy badly, which I – at the time – did not fully understand, but we are aware of that now,” she added.
Yellen’s remarks came after she attended a White House meeting during which Biden told Jay Powell, chairman of the US Federal Reserve, that he would respect the central bank’s “independence” as it moved toward tightening money. policy, which in practice gives the green light to fight inflation with sharply higher interest rates.
Like many private forecasters and the Fed itself, Yellen and White House economists believe the 2021 jump in inflation is linked to the rapid recovery caused by the first round of Covid-19 vaccinations and will fade relatively quickly. Instead, it persisted and even worsened after Russia’s attack on Ukraine.
A spokesman for the US Treasury Department later said that Yellen “points out” that there were economic shocks “that could not have been foreseen 18 months ago.”
“As she also noted, there is historical growth and record-breaking jobs, and our goal now is to move towards stable and steady growth as inflation declines,” the spokesman added.
Biden met with Powell at the White House on Tuesday for the first time since renouncing the Fed chairman for a second term as a sign that the president’s concerns about high inflation and the threat it poses to economic recovery are growing. .
“My plan … tackling inflation starts with a simple proposition: respect the Fed, respect the Fed’s independence, which I have done and will continue to do,” Biden told Powell as they met in the Oval Office.
The president added that he would give Powell and other Fed officials “the space they need to do their jobs” and “will not interfere with their critical work” to ensure “full employment” and “stable prices”. .
Biden chose to reappoint Powell for a four-year term as head of the Fed last year, opposing progressive calls for him to appoint a Democrat to the post, not a Republican who was nominated to head the central bank by former President Donald Trump. Powell was confirmed by the Senate for a second term on May 13 with the support of both parties.
The president’s promise not to interfere in the Fed’s decisions was intended to contrast with his predecessor’s approach, in which Trump scolded Powell for not lowering interest rates as the US economy slowed due to his trade wars.
But it is unusual for the president to support the Fed in raising interest rates in an election year, with midterm elections expected in November that will determine control of Congress. Biden accepted the tightening of money as rising prices became very problematic economically and politically for the White House and Democrats. As a result, their overthrow has dispelled fears that a tighter monetary policy would mean a slower economy.
“President Powell and other Fed members said at the time that they were laser-focused on tackling inflation like me,” Biden said, adding that he was convinced that monetary policy would “deal with the crisis for the American people.”
The Fed raised its key interest rate by 75 basis points this year, to between 0.75% and 1%. But it is expected to increase it by an additional 50 basis points at each of its next few meetings before re-evaluating its policies.
Although the Fed is an independent institution, US presidents periodically hold public and private meetings with seated central bankers to discuss domestic and international economic developments.
Biden last met with Powell in November when he nominated him for a second term. Trump met with Powell and Yellen, the presidents during his tenure, and Barack Obama invited Yellen and former President Ben Bernanke to the White House during his presidency.
Recommended
The meeting with Powell is part of what administration officials describe as their latest effort to shift to the economy, with polls showing voters condemning it to tackling inflation, even though job growth is strong.
The severity of high inflation, especially on petrol and food costs, will be more pronounced during Remembrance Day weekend, which is one of the busiest travel weekends of the year.
Biden and senior officials in his administration insist they use every tool at their disposal to fight inflation, although they are still debating whether to reduce tariffs on Chinese imports to reduce some price pressures.
“Talking about the economy and how we can put more money in the pockets of working families will be the key message the White House carries throughout the month,” a White House official said Tuesday.
Add Comment