July 6, 2022

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Treasury Secretary Admits She Was Wrong About 'Path Inflation'

Treasury Secretary Admits She Was Wrong About ‘Path Inflation’

“I think I was wrong at the time about the course inflation would take,” Yellen told CNN’s “The Situation Room” when asked about her comments from 2021 that inflation presents only a “little risk.”

The admission was the latest indication that the administration’s expectations about the normalization of the economy have been thrown into disarray by the ongoing pandemic and war in europe.

“As I mentioned, there have been unexpected and significant shocks to the economy that boosted energy and food prices and supply bottlenecks that have impacted our economy badly that I—at the time—didn’t quite understand, but we do now.”

At one point, Yellen and other White House officials coined inflation as a temporary side effect of the economy’s return to normal after the pandemic, citing bottlenecks in supply chains and outstripping demand over supply.

However, months later, inflation reached its highest level in nearly four decades.

Recent economic indicators have raised optimism that inflation may have peaked at a 40-year high in March, although economists warn that it may be a long time before inflation returns to healthy levels. In response, the White House is making a month-long effort to signal a major focus on the economy.

Monday’s batch began with the opening of an op-ed for President Joe Biden that was published in The Wall Street Journal Tuesday continued with a session in the Oval Office between Biden and Federal Reserve Chairman Jerome Powell Willen.

The Treasury secretary said Biden indicated at the meeting that he “shares the Fed’s priority in lowering inflation, and that he strongly believes in his support for the Fed’s independence in taking the necessary steps.”

The Fed led by Powell It has been criticized for being slow to tackle high inflation by ending emergency support for the economy and beginning to raise interest rates. The Fed, however, vowed to raise interest rates quickly, and earlier this month raised rates by half a percentage point for the first time since 2000. The US central bank signaled more aggressive rate hikes in the coming months.
After Yellen, a number of other economic aides flooded the waves with news broadcasts hoping to send a message that Biden was dedicated to lowering gasoline, food, and housing prices, resulting in Decline in his approval ratings.

Yellen said Tuesday that the president knows “what a huge and huge burden that inflation places on American families.”

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CNN’s Matt Egan contributed to this report.