Yellen: High inflation should ease mid-2022

WASHINGTON — Treasury Secretary Janet Yellen said she expects price increases to remain high through the first half of 2022, but rejected criticism the U.S. risks losing control of inflation.

Inflation is expected to ease in the second half as issues ranging from supply bottlenecks, a tight U.S. labor market and other factors arising from the pandemic improve, Yellen said on CNN’s “State of the Union” on Sunday. The current situation reflects “temporary” pain, she said.

“I don’t think we’re about to lose control of inflation,” Yellen said, pushing back on criticism by former Treasury Secretary Lawrence Summers this month. “Americans haven’t seen inflation like we have experienced recently in a long time. But as we get back to normal, expect that to end.”

On Friday, Federal Reserve Chair Jerome Powell sounded a note of heightened concern over persistently high inflation as he made clear the central bank will begin tapering its bond purchases shortly but remain patient on raising interest rates.

The S&P 500 Index posted its first decline in eight days. Powell said policies are “well-positioned” to manage a range of outcomes.

Yellen declined to say how she’s advised President Joe Biden on his decision whether to reappoint Powell. However, she said financial regulation “markedly strengthened” under Powell’s term, as it did during hers and under her predecessor, Ben Bernanke.

As the pandemic added stress to the financial markets, “the core of our financial system did very well because of the improvements in capital liquidity, risk management, stress testing,” Yellen said. “And those improvements have stayed in place during the Powell regime.”