Treasury Secretary Janet Yellen told Congress on Tuesday that the United States is facing “unacceptable levels of inflation.”
Inflation in the United States neared a four-decade high of 8.3% as of April, with the U.S. Bureau of Labor Statistics slated to release results for May later this week. During testimony before the Senate, however, Yellen admitted that she and Federal Reserve Chair Jerome Powell “could have used a better term than transitory” to describe higher prices.
“There’s no question that we have huge inflation pressures, that inflation is really our top economic problem at this point and that it’s critical that we address it,” she remarked, per The Guardian. “I do expect inflation to remain high, although I very much hope that it will be coming down now.”
Even by the end of last year, Yellen began pivoting from the “transitory” descriptor. “I am ready to retire the word transitory,” Yellen said at an event in December. “I can agree that that hasn’t been an apt description of what we are dealing with.”
Yellen’s mea culpa before lawmakers is similar to comments she made last week to CNN anchor Wolf Blitzer. “Well, look, 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 that have boosted energy and food prices and supply bottlenecks that have affected our economy badly. … But we recognize that now.”
Many officials in the Biden administration are pointing to the Fed as the primary entity responsible for taming high prices. Last week, Yellen and Powell joined President Joe Biden in a show of unity around the goal of raising interest rates.
Indeed, the Fed hiked rates by 0.5% last month — the largest rate increase since May 2000 — in an attempt to curb rising price levels. The move followed a 0.25% rate hike from near-zero levels three months ago. As employment numbers remain robust, the central bank likely interprets a strong labor market as a good omen for further rate increases.
In more recent comments, Yellen interpreted the strong employment numbers as a sign that President Biden’s economy has been a “remarkable success.”
“A year ago, if you go back to the challenges that we were facing, and the Federal Reserve was facing, unemployment was extremely high. We were all worried that we would be facing a situation like we had after 2008, when it took almost a decade to get back to full employment,” Yellen said. “I think it has to be viewed as a remarkable success that the unemployment has fallen the most in a year in American history.”
Though Biden’s economy observed 6.4 million new positions filled in 2021, many note that more than three million jobs were lost during COVID-19 and the lockdown-induced recession remain unrecovered.
Even after economic growth resumed in 2020 and the labor market quickly began to recover, a federal program offering $300 in weekly enhanced unemployment insurance — extended through Biden’s $1.9 trillion American Rescue Plan — remained intact in roughly half of states through much of 2021. According to a paper published by the National Bureau of Economic Research, the benefits significantly increased the number of Americans who were unwilling to work.