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Treasury Secretary Janet Yellen said that she doesn’t think inflation will be sinking back down in the coming weeks.
Yellen addressed the country’s levels of inflation during an interview that aired on CNBC Thursday afternoon. She said that while she still thinks the price increases are transitory, supply chain issues and bottlenecks stemming from the COVID-19 pandemic will continue to apply inflationary pressure to the economy.
“I think we will have several more months of rapid inflation,” Yellen said. “So I’m not saying this is a one-month phenomenon, but I think over the medium term, we’ll see inflation decline back toward normal levels. But, of course, we have to keep a careful eye on it.”
The treasury chief said the government needs to be “very attentive” to inflation developments but pointed out that the biggest sectors impacting price growth are the ones that are still opening up and recovering from the pandemic. She said that if the sectors weighing the heaviest on inflation were removed, prices would be more consistent with the Federal Reserve’s 2% inflation target.
Her remarks come just days after the Department of Labor announced that consumer prices increased 5.4% for the year ending June, the highest rate of inflation since 2008. The numbers soared past forecast expectations of 4.9%.
During the interview, Yellen also expressed concerns about how real estate prices are continuing to grow. There are some who are concerned that the burgeoning housing prices could be another bubble. Yellen said she worries about the impact the higher prices will have on lower-income buyers looking to purchase homes.
“I don’t think we’re seeing the same kinds of danger in this that we saw in the run-up to the financial crisis in 2008,” Yellen said. “It’s a very different phenomenon. But I do worry about affordability and the pressures that higher housing prices will create for families that are first-time homebuyers or have less income.”
Also on Thursday, Republicans on Capitol Hill questioned Fed Chairman Jerome Powell over concerns about inflationary fears. Powell told lawmakers that the central bank is closely watching the numbers but indicated that it will continue to keep interest rates near zero as the post-pandemic recovery continues.
“I’m concerned that the Fed’s current paradigm almost guarantees that it will be behind the curve if inflation becomes problematic and persistent,” GOP Sen. Pat Toomey of Pennsylvania told Powell.
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Original Author: Zachary Halaschak
Original Location: Yellen predicts 'several more months of rapid inflation'