Treasury secretary admits she was wrong about ‘the path inflation would take’

“I think I was wrong then about the path inflation would take,” Yellen told CNN’s Wolf Blitzer on “The Situation Room” when asked about her 2021 comments that inflation was not a problem. only a “small risk”.

The admission was the latest indication that the administration’s expectations for normalizing the economy were upended by the continuing pandemic and war in Europe.

“As I mentioned, there have been unforeseen and significant shocks to the economy that have driven up energy and food prices and supply bottlenecks that have severely affected our economics that I didn’t – at the time – not fully understand, but we recognize that now,” she said.

Yellen and other White House officials have previously called inflation a temporary side effect of the economy returning to normal after the pandemic, pointing to problems with supply chains and demand outstripping supply.

Yet months later, inflation hits a nearly four-decade high.

Recent economic indicators have prompted optimism that inflation may have peaked at 40-year highs in March, although economists warn that it could be a considerable time before inflation returns to lows. healthy levels. In response, the White House is launching a month-long effort to signal a heavy focus on the economy.

The push began Monday with an op-ed by President Joe Biden published in the Wall Street Journal and continued Tuesday with an Oval Office meeting between Biden, Federal Reserve Chairman Jerome Powell and Yellen.

The Treasury Secretary said Biden indicated at the meeting that he “shared the Fed’s priority in reducing inflation and that he believed strongly in supporting the independence of the Fed to take the necessary measures”.

The Powell-led Fed has been criticized for being slow to deal with high inflation by ending emergency support for the economy and starting to raise interest rates. However, the Fed has pledged to raise interest rates quickly and earlier this month raised them by half a percentage point for the first time since 2000. The US central bank signaled further aggressive rate hikes in the coming months.
Beyond Yellen, a number of other economic aides have flooded the cable news airwaves in hopes of getting the message across that Biden is dedicated to lowering the prices of gas, food and housing, which led to a drop in his approval ratings.

The president, Yellen said on Tuesday, knows “what a significant and enormous burden inflation places on American households.”

CNN’s Matt Egan contributed to this report.

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