Janet Yellen, US Treasury secretary, admitted she was “wrong” last year about the threat posed by rising inflation, while insisting Joe Biden’s administration was quick to focus on controlling control prices skyrocketed.
“I think I was wrong at the time about the path that inflation was going to take,” Yellen told CNN Tuesday, in a rare admission of error from a senior U.S. official.
“There have been massive and unforeseen shocks to the economy that have driven up food and energy prices as well as supply bottlenecks that have hit our economy so hard that I – at the time – don’t fully understand, but we realize it now,” she added.
Yellen’s comments came after she attended a White House meeting in which Biden told Jay Powell, the chairman of the US Federal Reserve, that he would respect the “independence” of the central bank. central bank when it tightens monetary policy effectively. green light to fight inflation with higher interest rates.
Like many private forecasters and the Fed itself, Yellen and White House economists believe the spike in inflation in 2021 is linked to the rapid recovery triggered by the Covid-19 vaccinations. first and will disappear relatively quickly. Instead, it lasted and got even worse after Russia’s attack on Ukraine.
Biden met with Powell at the White House on Tuesday for the first time since he stepped down from the Fed chair for a second term in the job, a sign of the president’s concerns about high inflation and The threat it poses to the economic recovery is growing. .
“My plan . . . to tackle inflation begins with a simple proposition: respect the Fed, respect the Fed’s independence, which I have done and will continue to do,” Biden told Powell. as they gathered in the Oval Office.
The president added that he would give Powell and other Fed officials “the space they need to do their jobs” and “not interfere in their critically important work” of ensuring “full employment.” labor” and “stable prices”.
Biden chose reappointed Powell, for four years as head of the Fed last year, supported progressive calls for him to pick a Democrat for the job over a Republican who was elevated by former president Donald Trump. assumed leadership of the central bank. Powell was confirmed by the Senate for a second term on May 13, with bipartisan support.
The president’s pledge not to meddle in Fed decisions is designed to contrast with his predecessor’s approach, in which Trump evaluated Powell for not lowering interest rates as the US economy slows because of his trade war.
But it is unusual for a president to support the Fed in raising capital interest rate in an election year, with midterm elections in November determining control of Congress. Biden has accepted monetary tightening because inflated prices have become high problem on economics and politics for the White House and Democrats. Thus, the devaluation of capital has superseded any concern that tighter monetary policy would mean a slowdown in the economy.
“Chairman Powell and other members of the Fed have noted at this point that they are as focused on tackling inflation as I am,” Biden said, adding that he was confident monetary policy would “resolve inflation.” crisis for the American people”.
The Fed raised its key interest rate by 75 basis points this year, to a range between 0.75% and 1%. But it is expected to increase moredown 50bp at each subsequent meeting, before re-evaluating its policies.
Although the Fed is an independent institution, US presidents periodically hold public and private meetings with sitting central bank presidents to discuss domestic and international economic developments. .
Biden last met with Powell in November, when he nominated him for a second term. Trump met with Powell and Yellen, chairs during his tenure, and Barack Obama invited Yellen and former chairman Ben Bernanke to the White House during his presidency.
The meeting with Powell is part of what administration officials are describing as their latest attempt to refocus on the economy, with polls showing voters are opposed to its handling of inflation. his growth even as job growth was strong.
The brunt of high inflation, particularly in relation to gas and food costs, will be more apparent over Memorial Day weekend, one of the busiest travel weekends of the year.
Biden and top officials in his administration insist they are using every tool at their disposal to fight inflation, although they are still debating whether to lower tariffs on imports. China to ease some price pressure or not.
“Talking about the economy and how we can put more money in the pockets of working families will be the main message being pushed by the White House all month,” a White House official said.
