- US price growth will stay elevated until the middle of 2022, Treasury Secretary Janet Yellen said.
- Inflation remains stubbornly high as supply shortages and the global energy crunch slam the US.
- Still, price growth will cool and inflation won’t spiral out of control like some fear, Yellen said.
Americans hoping price surges would soon cool off will have to wait at least a few more months, Treasury Secretary Janet Yellen said Sunday in an interview with CNN’s Anderson Cooper.
The US economic recovery has generally taken a turn for the better. Daily coronavirus case counts are falling, consumer spending has remained strong, and the unemployment rate continued to decline in September. Inflation, however, remains worryingly high.
Price growth picked up in September, with the Consumer Price Index rising 0.4%. That exceeded the average economist forecast and snapped a two-month streak of slower growth. Where experts thought inflation would ease up into 2022, it’s staying stubbornly high.
The near-term outlook isn’t promising. The world’s energy market remains a mess, and global supply chains are far from fully healed. The decade-high price growth will eventually slow down, but Americans will have to wait until the second half of 2022 to see a major change, Yellen told Cooper.
“I expect that to happen next year,” Yellen said, referring to when inflation will slow. “On a 12-month basis, the inflation rate will remain high into next year because of what’s already happened. But I expect improvement by the middle to end of next year.”
Still, Americans need not worry that inflation is spiraling out of control, the Treasury Secretary added. While the Biden administration and the Federal Reserve expect higher inflation to be temporary, others like former Treasury Secretary Larry Summers have raised concerns that inflation will stay dangerously high. Summers raised inflation concerns earlier in the year, slamming Democrats’ $US1.9 ($AU3) trillion stimulus bill as the “least responsible” economic policy in 40 years. More recently, the economist told CNN the country is “more in danger than we have ever been” of losing control of inflation.
Yellen pushed back against Summers’ inflation fears on Sunday, adding the supply bottlenecks that have intensified price growth will subside in due time.
“We are going through a period of inflation that’s higher than Americans have seen in a long time, and it’s something that’s obviously a concern. But we haven’t lost control,” Yellen said.
Yellen countered fears of rampant inflation but reiterated her concerns around the looming debt-ceiling deadline. Lawmakers reached a deal earlier in October to raise the debt limit and avert a default. Yellen recently warned that the new limit would only cover the government bills through December 3, teeing up another partisan battle over raising the ceiling.
Lawmakers have made little progress toward a more long-term solution. Senate Republicans are adamant that Democrats will have to raise the ceiling on their own, but Democrats maintain Republicans must help the US avoid defaulting on its debt.
It’s “inconceivable” that a solution may not be reached, Yellen said. The fallout from hitting the ceiling would be “utterly catastrophic,” and the responsibility to avoid default is shared equally by Democrats and Republicans, she added.
“It’s a housekeeping matter, doing what’s necessary to pay our bills,” Yellen said. “I have confidence it will get done, but I will leave it to House Speaker Nancy Pelosi and to Leader Schumer to figure out what the best way is forward on that.”