Even since taking office, Treasury Secretary Janet Yellen downplayed concerns about rising consumer prices. That is, until last week, when on July 15, she finally admitted that “rapid inflation” will last for several more months.
Back in February, Yellen assured the country that the Treasury Department had the tools and the power to handle any inflation that “materializes.” She also dismissed warnings made by President Trump’s Treasury Secretary Larry Summers that the Biden administration’s $1.9 trillion COVID relief bill would inevitably lead to inflation unseen in a generation.
Then in March, she soft-pedaled inflation concerns again. In a March 8 interview, when asked about inflation risks resulting from the $1,400 stimulus checks paid through the relief plan, she said, “I really don’t think that is going to happen. We had a 3.5% unemployment rate before the pandemic, and there was no sign of inflation increasing.”
Shortly after that, she said, “Is there a risk of inflation? I think there’s a small risk, and I think it’s manageable. “I don’t think it’s a significant risk. And if it materializes, we’ll certainly monitor for it, but we have tools to address it.”
The reality of climbing inflation hit the country as the summer started. Consumer and producer prices are jumping faster than they have in over a decade, and the trend shows no signs of slowing down.
Yellen finally had to change her public tone last week. She said that consumer prices would continue to rise until returning to normal sometime in the “medium-term rapidly.”
Even as she was unable or unwilling to say what is meant by the medium term, she claimed that inflation isn’t a concern. She said, “But, of course, we have to keep a careful eye on it.”
Regarding the current jump of nearly 15 percent in housing prices, Yellen told CNBC, “So I don’t think we see the same kinds of danger in this that we saw in the runup to the financial crisis in 2008.” She added, “It’s a very different phenomenon. But I do worry about affordability and the pressures that higher housing prices will create for families that are first-time homebuyers or have less income.”
Yellen’s comments come as Federal Reserve Chair Jerome Powell was questioned last week by lawmakers at the Capitol. Powell conceded that the Fed is not comfortable with recently rising inflation but insisted that the higher costs resulted from the reopening of the national economy following the coronavirus pandemic.