Treasury Secretary Janet Yellen said that her comments about higher inflation throughout the rest of the year are being misinterpreted.
After the G-7 meeting in London, where plans for a 15% global minimum tax were announced, Yellen said that inflation could be a point higher than the Federal Reserve’s goal for the rest of the year, remarks that drew headlines.
“We have, in recent months, seen some inflation, and we, at least on a year-over-year basis, will continue, I believe, through the rest of the year, to see higher inflation rates, maybe around 3%,” she said. “But I personally believe that this represents transitory factors.”
Yellen further said in an interview with Bloomberg that such a scenario would be a welcome one.
“If we ended up with a slightly higher interest rate environment, it would actually be a plus for society’s point of view and the Fed’s point of view,” she said.
Yellen tried to walk those comments back on her flight back to the United States. She told the New York Times that while she thinks inflation will be high for the next few months, it will settle back down to the Fed’s 2% target.
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She also downplayed the possibility of negative effects from the increase in prices. “I don’t see any evidence that inflation expectations are getting out of control,” Yellen said.
Last week, the Commerce Department said that a key inflation indicator rose from a yearly pace of 3.1% in April, topping the predicted rise by 2.9% and further fueling anxiety about inflation.
Yellen was also asked about labor shortages in the U.S. Some business owners are finding it difficult to find employees, especially for lower-wage jobs, even as the pandemic subsides. Some leading economists have suggested that the federal government’s expanded unemployment program is keeping people from the workforce because of its generous payouts.
Yellen said she didn’t think that there is any evidence that the jobless benefits are holding back the labor force. She said that a lack of child care and jobs that were permanently lost during the pandemic are more likely to blame.
“We wanted to support people,” the Treasury chief said. “This isn’t something that should be in place forever.”
About two dozen states have announced early ends to the expanded program, which is planned to sunset in September. While the White House was adamant about the importance of the funds earlier on, there was a bit of a tone shift from the White House on Friday when press secretary Jen Psaki affirmed that GOP states have “every right” to end the program early.
The May jobs report, which was released before Psaki’s comments on Friday, fell a bit short of expectations, reigniting concerns about a labor shortage. The economy added 559,000 new jobs, as opposed to predictions of 650,000. The report from the month before was even more disappointing.
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Yellen’s trip to London to meet with the world’s top finance chiefs handed a major win to the Biden administration. She announced the 15% agreement on Saturday and called it an “unprecedented commitment” that would “end the race-to-the-bottom in corporate taxation.”
