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Inflation to “stay high”; hopes it ‘comes down’

WASHINGTON – Treasury Secretary Janet Yellen on Tuesday conceded that she and Federal Reserve Chair Jerome Powell could have used “a better word” than “temporary” when describing the expected path of inflation in the US economy. She added that she hopes it will reverse soon.

“I expect inflation to remain high, although I really hope it will come down now,” Yellen told the Senate Finance Committee during a hearing on the agency’s latest budget proposal. “I think bringing down inflation should be our top priority.”

The Federal Reserve and Treasury Department are increasingly being blamed by lawmakers and the public for pushing inflation to record highs — specifically an 8.3% rise in consumer prices last year.

She told CNN last week that she didn’t fully understand the impact that unexpected major shocks and supply shortages would have on the economy.

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“Look, I think I was wrong at the time about the path inflation was going to take,” she said.

The hearing was an opportunity for lawmakers to urge Yellen on the causes of inflation if it could recede and the government’s plans to ease the pain for Americans.

“We are now entering a period of transition from a historic recovery to one that may be characterized by stable and steady growth,” she said. “This shift is a key part of the President’s plan to bring inflation under control without sacrificing the economic gains we’ve made.”

Regarding previous statements by Yellen and Powell that the US inflation problem is temporary, Yellen acknowledged: “We both could have used a better word than temporary. There is no question that we have enormous inflationary pressures. Inflation is really our biggest economic problem right now.”

Inflation has shown signs of slowing but is likely to remain well above the Fed’s 2% target through the end of this year.

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The Congressional Budget Office released an economic outlook this month saying high inflation will continue into next year, likely resulting in the federal government paying higher interest rates on its debt.

The bipartisan agency expects the CPI to rise 6.1% this year and 3.1% in 2023. This forecast suggests that inflation will slow from the current yearly level of 8.3%, but would still be dramatically above a long-term baseline of 2.3%. .

Yellen was asked about her support for last year’s American Rescue Plan, also known as the ARP, which has come under fire from some economists who claim the $1.9 trillion program has exacerbated price spikes.

With global inflation high, Yellen said, “it can’t be” that ARP is largely responsible for most of US inflation.

Over the weekend, Yellen was forced to defend her support for ARP after Bloomberg wrote about an excerpt of an upcoming biography of the secretary, which said she privately agreed with former Treasury Secretary Larry Summers “that too much too soon State money was pouring into the economy, which is why it had unsuccessfully attempted to cut the $1.9 trillion relief plan by a third in early 2021 before Congress passed the massive program.”

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Yellen said in a statement on Saturday: “I have never pushed for adoption of any smaller package of America’s bailout plan, and I believe ARP has played a pivotal role in fostering strong growth in 2021 and beyond, with real GDP -US growth has outperformed other advanced economies and our job market is recovering faster than historical experience.”

Yellen said during the hearing that Congress should also play a role in bringing prices down, by passing legislation that increases taxes for wealthy individuals — and by passing language for a global tax treaty that has stalled in Congress and previously included in the now dead was Build Back Better plan.

The global tax treaty aims to impose a 15% tax rate on large multinational companies wherever they operate. It would also provide for taxing some of the profits of the largest global companies in countries where they do business online but may not have a physical presence.

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“As the prospects of recession and stagflation rise, this is not the time to be thinking about raising taxes or reviving reckless spending from the House’s Build Back Better plan,” said Republican Sen. Mike Crapo.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, transcribed or redistributed without permission.

https://www.local10.com/news/politics/2022/06/07/yellen-inflation-to-remain-high-hopes-its-coming-down/ Inflation to “stay high”; hopes it ‘comes down’

Sarah Y. Kim

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