Yellen says inflation will remain high, Biden likely to raise Reuters forecast

By David Lauder and Andrea Shalal

WASHINGTON (Reuters) – US Treasury Secretary Janet Yellen told senators on Tuesday that she expects inflation to remain high and the Biden administration is likely to raise its 4.7% inflation forecast for this year in its budget proposal.

During a Senate Finance Committee hearing, Yellen said the United States was dealing with “unacceptable levels of inflation,” but hoped that price increases would soon begin to decline.

US consumer price index inflation has been above 8% in recent months, the highest in more than 40 years and well above President Joe Biden’s administration’s forecast for its 2023 fiscal budget.

But another indicator, the main price index of personal consumer spending, excluding variable food and energy spending, began to cool, falling to 4.9% in April

“I expect inflation to remain high, although I very much hope that it will go down now,” she said.

Yellen has repeatedly dismissed Republican claims that inflation was fueled by Biden’s $ 1.9 trillion CIDID-19 spending legislation last year.

“We see high inflation in almost every developed country in the world. And they have very different fiscal policies,” Yellen said. “So it can’t be that most of the inflation we’re experiencing reflects the impact of ARP.”

The Biden administration is still pushing for a reduced version of its stagnant climate and social spending program, which will offer clean credit for clean energy technologies and reform the prices of prescription drugs – policies that Yellen says will help reduce the cost of American consumers tired of price hikes.

Yellen reiterated that inflation is fueled by high energy and food prices caused by Russia’s war in Ukraine, the shift to buying goods during the pandemic and new versions of COVID-19, and the constant disruption of the supply chain.

“TRANSITIONAL” WRONG WORD

Yellen has been criticized by Republicans for admitting that she made a mistake last year in predicting that inflation would be transient and fall rapidly. She will face more difficult issues on the issue at a hearing on the Committee on Ways and Means in the House of Representatives on Wednesday.

Yellen added that both she and Federal Reserve Chairman Jerome Powell “could probably use a better term than a transitional one” to describe inflation, which they say will fade quickly.

“When I said that inflation would be transient, what I did not expect was a scenario in which we would end up fighting many variants of COVID that would shatter our economy and global supply chains, and I did not foresee the impact on food. and the energy prices we have seen since Russia’s invasion of Ukraine, “Yellen said.

She testified when the World Bank warned on Tuesday of an increased risk of “stagflation” – a combination of weak growth in the 1970s and high inflation – to return as it cut its global growth forecast by nearly a third to 2.9% for 2022