Finance Minister Janet Yellen says she was “wrong” regarding inflation
WASHINGTON – The Biden administration acknowledged on Tuesday that it was wrong to downplay the threat of rising inflation last year as the White House works to combat rising consumer prices that have hampered Joe Biden’s presidency.
“I think I was wrong then about the path inflation would take,” This was stated by Finance Minister Janet Yellen in an interview on CNN.
Yellen said in March 2021[ads1] that inflation poses only a “small risk”. Two months later, she said she had no idea inflation would “be a problem.” Earlier that spring, Biden signed its $ 1.9 trillion COVID-19 rescue plan into law, boosting spending by critics to boost inflation.
“As I mentioned, there have been unexpected and major shocks to the economy that have increased energy and food prices, and bottlenecks in supply, which have affected our economy badly that I did not fully understand at the time,” Yellen told CNN. “But we recognize it now.”
More:Powell says the Fed will continue to raise interest rates until it reduces inflation
The Secretary’s admission is the most direct admission to date from the White House that officials were unable to understand the extent of inflation that would come as the United States recovered from the coronavirus pandemic. The administration later predicted that the increase in consumer prices would be temporary.
With inflation at 40 years high, Biden met on Tuesday with central bank governor Jerome Powell and promised to give him space to cope with rising consumer prices.
“My plan to address inflation starts with a simple proposal: Respect the Fed. Respect the Fed’s independence,” Biden said in brief remarks ahead of the Oval Office meeting.
Biden called this month to tackle inflation for its “top domestic priority.” Biden and the Democrats are facing strong headwinds to maintain control over Congress during the midterm elections in November as a result of price increases that have made many consumers increasingly anxious.
The consumer price index rose 8.3% annually in April, slightly lower than 8.5% in March, as a fall in petrol prices offset a continued increase in food, rent and other costs. The average price of gasoline on Tuesday reached a record high of $ 4.62 per gallon, according to AAA, approx. $ 1.50 more than the drivers paid last Memorial Day weekend.
More:Sky-high inflation slowed in April. Will price-tired customers get some relief?
Earlier this month, the Federal Reserve raised its leading short-term interest rate by half a percentage point. The Fed was created by Congress as an independent agency, although members of its board, including the Fed leader, are appointed by the president.
Some economists fear an increasing risk of a recession as higher interest rates cause consumers to curb their spending.
Brian Deese, director of the Bidens National Economic Council, claimed that the United States is “uniquely well positioned” so that steps against inflation will not be at the expense of new jobs. Unemployment fell to 3.6 per cent in April.
“We can actually take on inflation without having to sacrifice all these gains,” he told reporters.
More:Some top economists say that a recession will increase more likely, but it will probably be mild
The meeting, which came at Biden’s invitation, was his first with Powell since the president nominated him for another term in November as head of the Federal Reserve and their third meeting overall. Powell was confirmed by Congress earlier this month as head of the central bank, and he was sworn in last week. Yellen and Deese also participated.
The central bank has also said it will start shrinking its $ 9 trillion in bond holdings next month, a strategy that will push long-term interest rates higher.
Other obstacles to fighting inflation, such as Russia’s war in Ukraine and supply chain issues, remain out of the central bank’s control.
More:Biden calls inflation his highest domestic priority, and accuses Republicans of lacking a plan
Biden’s hands-off approach with the Federal Reserve is different from former President Donald Trump, who often raged against the Federal Reserve, and often publicly urged Powell – whom he nominated in 2017 – to cut interest rates to boost the nation’s economy. Former Presidents Barack Obama, George W. Bush and Bill Clinton also avoided confrontations with the Fed.
Contributor: Paul Davidson
Now Joey Garrison on Twitter @joeygarrison.
