Yellen calls elevated inflation 'unacceptable,' but offers few solutions to cool prices
Yellen blames inflation spike on Ukraine war, COVID-19 pandemic
Inflation: How consumers can keep up as prices rise
Payne Capital Management president Ryan Payne and TJM institutional director Jim Iuorio reveal how consumers can respond to record-high inflation on 'Making Money.'
Treasury Secretary Janet Yellen on Tuesday said the U.S. faces "unacceptable" levels of inflation as a result of the COVID-19 pandemic and the Russian war in Ukraine and pledged to drive down the price of everyday goods with an "appropriate" budgetary stance.
"We currently face macroeconomic challenges, including unacceptable levels of inflation as well as the headwinds associated with the disruptions caused by the pandemic’s effect on supply chains, and the effects of supply side disturbances to oil and food markets resulting from Russia’s war in Ukraine," Yellen said in prepared remarks while testifying before the Senate Finance Committee.
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Yellen said that elements of President Biden's proposed spending legislation – including reform to the prescription drug market and clean energy initiatives – could help reduce costs for many American families.
But she offered few solutions to cool the hottest inflation in nearly four decades beyond that, and noted any actions from the White House or Congress would merely act as an accompaniment to steps taken by the Federal Reserve.
Janet Yellen speaks during a House Financial Committee hearing in Washington, on Dec. 1, 2021. (Al Drago/Bloomberg via Getty Images / Getty Images)
"To dampen inflationary pressures without undermining the strength of the labor market an appropriate budgetary stance is needed to complement monetary policy actions by the Federal Reserve," she said. "Moving forward, elements of the president’s proposed legislation – including the clean energy initiatives and plans to reform the prescription drug market – can help lower the costs paid by American consumers."
The White House started taking steps last week to address growing voter unrest over surging inflation by stressing that officials are maximizing efforts to bring prices under control ahead of the November midterms, in which Democrats risk losing their already razor-thin majorities.
Biden called tackling inflation his "top priority" during a rare Oval Office meeting last week with Fed Chair Jerome Powell, though he also sought to deflect blame over soaring prices, saying that fighting inflation largely falls under the purview of the central bank. The White House has increasingly tried to shift the responsibility for tackling prices to the Fed – as polls show that inflation, which has hovered near a 40-year high for months, is a top concern for voters.
.A man walks past the U.S. Federal Reserve in Washington on April 29, 2020. (Xinhua/Liu Jie via Getty Images / Getty Images)
"My plan is to address inflation. That starts with a simple proposition: Respect the Fed, respect the Fed’s independence, which I have done and will continue to do," Biden said.
A Labor Department report last month said the consumer price index jumped by 8.3% in April, underscoring that inflationary pressures in the economy remain very strong. On top of that, gas prices hit another record high on Tuesday, with a gallon of gas on average now costing $4.91 — up 40% from just one year ago.
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Most economists now expect elevated prices to persist throughout the year, worsening the political headache for both Biden and the Fed. Administration officials have since conceded they did not expect last year to unfold as it did.
"I think I was wrong then about the path that inflation would take," Yellen said last week during an interview on CNN. "There have been unanticipated and large shocks that have boosted energy and food prices, and supply bottlenecks that have affected our economy badly that I... at the time, didn’t fully understand."