As the Biden administration struggles to limit a growing political liability, US Treasury Secretary Janet Yellen conceded on Tuesday that she underestimated how long rising inflation would continue to afflict American consumers.
“I think I was wrong then about the path that inflation would take,” Yellen told CNN in response to a question about her statements from 2021 that inflation constituted only a “small risk.”
The revelation was the latest sign that the administration’s hopes for a stabilising economy had been dashed by the ongoing pandemic and the war in Europe.
“As I mentioned, there have been unanticipated and large shocks to the economy that have boosted energy and food prices and supply bottlenecks that have affected our economy badly that I didn’t — at the time — didn’t fully understand, but we recognize that now,” Yellen said.
Yellen and other White House officials initially characterised inflation as a temporary side effect of the economy recovering to normal after the pandemic, citing supply chain breakdowns and demand outstripping supply.
Despite this, inflation is nearing a four-decade high.
Recent economic data suggest that inflation may have peaked at 40-year highs in March, while economists warn that it could take some time before inflation recovers to healthy levels. In response, the White House is launching a month-long campaign to signify a strong emphasis on the economy.
The effort began on Monday with President Joe Biden‘s op-ed in The Wall Street Journal, and it continued on Tuesday with an Oval Office meeting between Biden and Federal Reserve Chairman Jerome Powell.
The Treasury secretary stated that Biden stated during the discussion that he “shares the Fed’s priority in lowering inflation, and that he believes strongly in his support of the independence of the Fed to take the steps that are necessary.”
The Powell-led Fed has been chastised for taking too long to combat high inflation by withdrawing emergency economic stimulus and initiating interest rate hikes. However, the Fed has promised to raise interest rates quickly, and rates were raised by half a percentage point earlier this month for the first time since 2000. The Federal Reserve of the United States has indicated that it will continue to raise interest rates aggressively in the coming months.
Aside from Yellen, a slew of other economic advisers have saturated cable news with the message that Biden is committed to lowering fuel, food, and housing prices, which have resulted to a drop in his support ratings.
Yellen stated on Tuesday that the President is aware of “what an important and huge burden inflation is placing on American households.”