Yellen tamps down inflation fears over Biden spending plan
US President Joe Biden’s economic plan is unlikely to create inflation pressure in the US because the boost to demand will be spread out over eight to ten years, said Treasury Secretary Janet Yellen.
“I don’t believe that inflation will be an issue. But if it becomes an issue, we have tools to address it,” Yellen, the former Federal Reserve chair, said Sunday on NBC’S Meet the Press.
Yellen also said the US has the “fiscal space” to make investments in its economy, with interest rates low and likely to remain so, but over the long haul, budget deficits need to be “contained.”
Another top Biden administration economic adviser said inflation now apparent in certain pockets of the economy is “transitory” as the nation exits the pandemic.
Cecilia Rouse, chair of the White House Council of Economic Advisers, said supply chain issues and labour market shortages are “bumps along the way” to recovery.
There’s no sense for now that these price increases are becoming “de-anchored,” she said on Fox News Sunday, while promising to remain vigilant on inflation pressures.
“For the time being we expect at most transitory inflation, that is what we expect coming out of a big recession,” she said.
Yellen and Rouse spoke following last week’s unveiling of the latest economic plan from the Biden administration, which is proposing a combination of $1.8 trillion in spending and tax credits for areas such as education, child care and paid family and medical leave.
This would come on top of almost $2.25 trillion in infrastructure, home health care and other outlays that the administration proposed at the end
“I DON’T BELIEVE THAT INFLATION WILL BE AN ISSUE. BUT IF IT BECOMES AN ISSUE, WE HAVE TOOLS TO ADDRESS IT...FOR THE TIME BEING WE EXPECT AT MOST TRANSITORY INFLATION, THAT IS WHAT WE EXPECT COMING OUT OF A BIG RECESSION”
JANET YELLEN,
US TREASURY SECRETARY
of March, not to mention the $5 trillion that the government has injected into the economy through the three pandemic relief packages passed by Congress during the past 14 months. The massive government spending has helped turbo-charge economic growth, and helped drive a stock market rally to record highs. US gross domestic product increased at an annualised rate of 6.4 per cent during the first quarter, the Labor Department reported on Thursday. Personal consumption surged at an annualised rate of 10.7 per cent, the second-fastest since the 1960s.
As the US and other major economies rebound from the pandemic, prices for everything from copper to oil have skyrocketed. Meanwhile, a key measure of consumer prices, known as the personal consumption expenditure price index, rose 2.3 per cent in March from a year earlier, marking the largest jump since 2018.