Yellen says she was “wrong” about the inflation path; Biden supports the Fed

US Treasury Secretary Janet Yellen testifies during a hearing in the US House Committee on Financial Services on the annual report of the Financial Stability Oversight Council, on Capitol Hill in Washington, DC, USA May 12, 2022. Saul Loeb / Pool via REUTERS

WASHINGTON, May 31 (Reuters) – US Treasury Secretary Janet Yellen said Tuesday she was wrong in the past about the path inflation would take, but said curbing price increases is President Joe Biden’s top priority and that he supports the Federal Reserve’s actions to achieve that.

Asked in a CNN interview whether she was wrong in downplaying the threat posed by inflation in public statements over the past year, Yellen said: “I think I was wrong then if the path inflation would take.”

“As I mentioned, there have been unforeseen and major shocks in the economy that have increased energy and food prices and supply bottlenecks that have hit our economy hard that I did not fully understand at the time,” Yellen said, adding that the shocks. everything from Russia’s invasion of Ukraine to recent covid-19 shutdowns in China.

“So really, the shocks to the economy have continued, but inflation is the biggest concern for President Biden,” Yellen said.

Biden “strongly believes and supports the independence of the Fed to take the necessary steps” to reduce inflation, Yellen said, adding that unemployment was also almost as low as it has ever been since World War II.

A Finance Ministry spokesman later said: “The secretary pointed out that there have been shocks in the economy that have exacerbated inflationary pressures that could not have been foreseen 18 months ago, including Russia’s decision to invade Ukraine, several subsequent variants of COVID, and shutdowns in China. . “

Earlier in the day, Biden met with Fed Chairman Jerome Powell and stressed that he “respects the independence of the Federal Reserve,” said a White House official. read more

Yellen said the Biden administration was taking action to try to supplement the Fed’s efforts by reducing the cost of prescription drugs and health care and by pushing proposals in Congress to increase the use of renewable energy.

While saying that a recent decline in core inflation data was encouraging, she noted that oil prices remained high and Europe was working on a plan to ban imports of Russian oil.

“We can not rule out further shock,” Yellen said.

Reporting by David Lawder and Costas Pitas; Edited by Leslie Adler and Sam Holmes

Our standards: Thomson Reuters Trust Principles.