The U.S. is currently facing “unacceptable levels of inflation,” Treasury Secretary Janet Yellen told a hearing of the Senate Finance Committee on Tuesday.
Why it matters: Yellen made waves last week by admitting that she had been “wrong about the path inflation would take” when she predicted last year that inflation posed a short-term problem to the U.S. economy.
What she’s saying: At the hearing, Yellen praised the state of the economic recovery, which she said was marked by strong economic growth and “historically low” unemployment, but acknowledged that difficulties remain.
- “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,” she said.
- “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.”
The big picture: Yellen said that President Biden’s 2023 budget proposal, which was the focus of the hearing, puts forth “smart, fiscally responsible investments, cutting deficits and keeping the economic burden of debt low.”
- She added that Biden’s clean energy initiatives and policies to reform prescription drug pricing, if passed, “could help lower the costs paid by American consumers.”
Go deeper: Yellen warns of “stagflationary effects” of higher food and gas prices