© Bloomberg. Janet Yellen, US Treasury secretary, speaks at a news conference during the annual meetings of the International Monetary Fund (IMF) and World Bank Group in Washington, DC, US, on Friday, Oct. 14, 2022. Yellen this week, reacting to data showing another faster-than-anticipated increase in consumer prices, said the US has
(Bloomberg) — Treasury Secretary Janet Yellen dismissed the idea that high inflation is becoming embedded in the US economy, pointing to moderate expectations for price gains over the longer haul.
“The way inflation would become embedded is if you saw expectations for inflation over the medium term rising to levels inconsistent with 2% inflation — and then those higher inflation expectations being built into wages and prices, Yellen said Friday in answering reporters’ questions after an event in Herndon, Virginia. “And I see no sign of that.”
The latest consumer price index report fueled worries about sustained inflation pressures, with a measure that excludes food and energy jumping 6.6% in September from a year before. That was the biggest surge since 1982.
“We’ve got a ways to go to get inflation down,” based on that report, Yellen said. But “we’re seeing some early signs — for example faster supplier delivery, shipping costs coming down — that will feed into” prices over time, she said.
The Federal Reserve Bank of New York’s measure of one-year-ahead inflation expectations, which jumped to as high as 6.8% in June 2022, has since declined to 5.4%
‘See a Path’
Yellen also reiterated her assessment that there’s still a possible path to bringing down inflation without a surge in unemployment.
“One of the reasons I continue to see a path to lowering inflation while maintaining a strong labor market in the process is because I do not believe we’re in an entrenched inflation situation,” she said.
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The Treasury chief also hailed Friday’s report showing the biggest reduction in the US budget deficit on record. President Joe Biden’s economic policies have shored up fiscal credibility, she said.
“I do see our debt as being on a responsible path,” she said. Yellen highlighted that the rate of interest paid on government debt, after adjusting for inflation, was negative for the past couple of years. Administration projections show it rising to 1%, “which is a low level that’s historically average,” she said.
Meantime, Yellen declined to comment on a report that Biden administration officials are discussing whether the US should subject some of Elon Musk’s ventures to national security reviews.
The Treasury heads the Committee on Foreign Investment in the US, which vets overseas purchases of American assets. Yellen said, “I cannot speak about individual cases at CFIUS, that’s confidential.”
She also said she was “glad” that Musk had decided to continue providing internet access to Ukraine.
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