Treasury Secretary Yellen expects headline inflation to slow in 2023

New York
CNN
–

Treasury Secretary Janet Yellen struck a cautiously optimistic tone about 2023, predicting a significant slowdown in inflation and asserting that a recession is not required to bring prices back under control.

“I think by the end of next year you will see much lower inflation rates, if there is no unexpected shock,” Yellen said On CBS’ “60 Minutes.” In an interview that aired on Sunday.

Yellen was quoted on lower gas prices — AAA said Monday The national average decreased by 52 cents per gallon last month – lower shipping costs and shorter delivery delays.

“I hope it’s short-lived,” Yellen said of the current period of high inflation. “We learned a lot of lessons from the high inflation that we had in the 70s. We all understand that it is very important that inflation be controlled and that it not become endemic in our economy. And we are making sure that it does not happen.”

Yellen, like many economists and even the Federal Reserve, was overly optimistic about inflation. She admitted earlier this year that she was “wrong” about the path of inflation. to CNN’s Wolf Blitzer in June that she “didn’t – at the time – fully understand” the big shocks to the economy that would come from her Russia’s war in Ukraine.

Comments come later Hotter-than-expected wholesale inflation report on Friday, That showed producer prices rose in November at the slowest annual pace in 18 months.

The closely watched consumer inflation report due for release on Tuesday this week is expected to show a similar slowdown in consumer prices.

The Federal Reserve is widely expected to raise interest rates for the seventh time in a row on Wednesday, although investors are betting that the US central bank will slow the pace of interest rate increases from three-quarters of a point to half a point. Large interest rate increases by the Federal Reserve drive up borrowing costs – credit card rates are at record levels – and raised fears of a recession.

Yellen acknowledged the possibility of a recession in the coming months – although the former Fed chair stressed that one is not required to tame inflation.

“There is a risk of a recession,” Yellen said. “But it is certainly not, in my opinion, a necessary thing to bring down inflation.”

Like other Biden administration officials, Yellen has argued that the economy is in the midst of a healthy transition from explosive growth to something more sustainable.

“We recovered very quickly from the pandemic. Economic growth was very high,” Yellen said. “To bring down inflation and because almost anyone who wants a job has a job, growth has to slow.”

Yellen said the US economy is in full operation or close to full employment, which means it is “not necessary” for rapid growth to put people back to work.

The Treasury secretary said she is trying to instill a sense of empathy and urgency in policymaking by assuring her staff that real people are suffering.

Yellen recalled how in 2009 when millions of people were out of work in the middle of the Great Recession, she reminded her staff at the Federal Reserve Bank of San Francisco, where she was chair from 2004-2010, that there are real people behind the labor market statistics. And economists have to worry about their own well-being.

“I think I said, ‘They’re s*** people,’” Yellen said. “I wanted the people who work with me to take seriously the hurt and misery that so many Americans have experienced.”