Treasury Secretary Janet Yellen on Tuesday said that while the United States has seen strong economic growth and “historically low” unemployment, that the country is currently facing “unacceptable levels of inflation.”
“We currently face macroeconomic challenges, including unacceptable levels of inflation, as well as the headwinds associated with the disruptions caused by the pandemic’s effect on supply chains, and the effects of supply side disturbances to oil and food markets resulting from Russia’s war in Ukraine,” Yellen testified before the Senate Finance Committee.
She added: “To dampen inflationary pressures without undermining the strength of the labor market, an appropriate budgetary stance is needed to complement monetary policy actions by the Federal Reserve.”
The Consumer Price Index, a major inflation gauge measuring the cost of the average household basket of goods, hit 8.5 percent over the 12-month period ending in March — the largest 12 month increase since December 1981. The Congressional Budget Office recently predicted that inflation will steadily decrease but continue into 2023.
Yellen’s testimony came one week after she acknowledged she had previously misjudged the trajectory of inflation in the U.S.
Last week, CNN’s Wolf Blitzer questioned Yellen about her comments in 2021 that the risk of inflation was not high.
She said in 2021: “Is there a risk of inflation? I think there’s a small risk. And I think it’s manageable,” later adding, “To get a sustained high inflation like we had in the 1970s, I absolutely don’t expect that.”
“Was it a mistake, Madame Secretary, to downplay this inflation risk? Did that contribute to the problems we’re all seeing right now?” Blitzer asked.
“I think I was wrong then about the path that inflation would take,” Yellen said. “As I mentioned, there have been unanticipated and large shocks to the economy — the boosted energy and food prices and supply bottlenecks that have affected our economy badly — that at the time I didn’t fully understand.”
Meanwhile on Tuesday, Yellen suggested that President Biden’s 2023 budget proposal features “smart, fiscally responsible investments, cutting deficits and keeping the economic burden of debt low.”
She added that the president’s clean energy proposals and policies to reform prescription drug pricing could help lower costs for American consumers, if passed.