Yellen says the administration is fighting inflation, admits she was wrong that it was ‘transitory’

Treasury Secretary Janet Yellen stressed that the White House is ready to implement a number of strategies to reduce the burden of inflation, which she admits is too high for Americans.

In an interview Tuesday with CNBC’s Becky Quick, Yellen listed efforts to target prescription drug costs, budget deficits, and oil production that could bring oil prices down near the fastest pace since from the early days of the Reagan administration.

The remarks came the same day President Joe Biden met Yellen and Federal Reserve Chairman Jerome Powell, who have begun fighting inflation by raising interest rates.

“The president emphasized his intention to do everything possible to reduce the costs Americans face for key items in their budgets,” Yellen said in the meeting description. “Prescription drugs, for utility bills, things the president does on his own or works with Congress can make all the difference and also his support for deficit reduction,” she noted. .”

In both a pre-meeting statement and an article for The Wall Street Journal, Biden highlighted the Fed’s role in lowering prices.

The Journal specifically said, “First, the Federal Reserve’s primary responsibility is to control inflation.” Meanwhile, Yellen — Powell’s direct predecessor as head of the central bank — also noted that responsibility.

“The Fed has a dual mandate and that is maximum employment and price stability. I think that’s the wording in the law,” she said in the interview that aired Wednesday on “Squawk Box.” “But we are at full employment. We have a very strong labor market. That has been achieved, but inflation is too high and that is a real burden on American households. And so, maintaining full employment while reducing inflation, that’s the president’s priority, and I believe that aligns with how the Fed views its programs.”

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For its part, the Fed has approved two rate hikes this year totaling 75 basis points. Officials have indicated that a further 50 basis points increase is likely in the next few meetings, after which the central bank can assess the impact the tightening of monetary policy is having.

Both Powell and Yellen spent much of 2021 saying that inflation was “transient” and likely to ease as Covid-19-specific factors such as supply chain issues and consumer demand ease. too large for service to return to normal.

In a separate interview on Tuesday, Yellen admitted she was wrong.

“I think I was wrong about the path that inflation would take,” she told CNN’s Wolf Blitzer. “There have been massive and unforeseen shocks that have driven up food and energy prices, and supply bottlenecks that have hit our economy so hard that I… at the time, didn’t understand it. end”.

In an interview with CNBC, Yellen said a spending plan “could very well help reduce prescription drug costs, which would make a difference for every family that has drug costs as part of their household budget.” family”.

Although she said it “could make a difference very quickly,” most of the administration’s plans will likely take longer to filter through the economy.

Biden frequently blames Russia’s attack on Ukraine for record-high gas prices, but energy costs were higher than before the war. The administration also said energy companies are signing thousands of oil leases that could allow for greater production, although those leases will likely take years to develop.

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