Yellen: Federal Reserve won’t allow inflation to reach 1970s levels


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Yellen says he expects inflation to return to an acceptable level of around 2% by next year

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Treasury Secretary Janet Yellen on Tuesday eased concerns that inflation could rise to levels seen during the economic downturn in the 1970s, saying the Federal Reserve would act before an increase of that magnitude.

Yellen has repeatedly stated that he expects inflation to return to an acceptable level of around 2% by 2022. He “repeated that stance during an appearance on”Market“Radio shows, debating economic conditions will improve as the economy recovers from the COVID-19 pandemic.


Asked about the possibility that his forecast was wrong, Yellen sought to assure that the inflation situation would be “watched carefully.” She said the Federal Reserve “won’t allow” double-digit inflation levels seen in the 1970s, when Americans experienced nationwide gas shortages and other economic hardships after the Vietnam War.

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“Monetary policy has to play a role if this is something that is endemic,” Yellen said. “In the 1970s, we saw supply shocks turn themselves into endemic inflation, wage increases, resulting in price increases. We’re not seeing that anymore. I don’t believe we would. But if it were, So the Federal Reserve has to play a role in keeping that under control.”

Inflation hit a 13-year high of 5.4% by September. The Biden administration has faced increasing pressure to address the high costs of daily necessities like gas and meat, while businesses grapple with supply chain constraints and labor shortages.

Former Obama administration economic adviser Larry Summers is a notable critic of Yellen’s stance, insisting last month that he thought there was “less than a 50/50 chance” that she was right about a drop in inflation by next year.

“The more labor supply, the more general pattern of demand is expected to be seen,” Yellen told “Marketplace.” “As people feel safer, the demand for these goods, whose prices are rising, will decrease, and they are going to go back to services in a more normal pattern. And at that point, I expect the price to rise to the level. .off, and we’ll go back to inflation that’s closer to the 2% that we consider normal.”

Republicans argue that the Biden administration’s economic policies are to blame for rising inflation. He warned that the crisis could worsen if Congress enacts Biden’s comprehensive social spending bill.

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Meanwhile, the president and his aides say inflation levels are fleeting. President Biden has argued that his infrastructure and spending bills would help address the underlying causes.

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