A day after the latest inflation data came in hotter than expected, Treasury Secretary Janet Yellen said the path to relieving price pressures will be bumpy and expressed regret for being one of many Biden administration officials who repeatedly insisted that inflation would be “transitory.”
The latest data brings the cumulative inflation since President Joe Biden took office in January 2021 to roughly 19 percent. However, alternative CPI measures, like the ShadowStats gauge that uses the same methodology the U.S. government used in the 1980s, estimate that the actual pace of inflation is nearly twice as high.
Despite numerous expert warnings that inflation would prove stubbornly persistent, Ms. Yellen and other members of the Biden administration sought to allay concerns, vocalizing a chorus of opinions through 2021 that inflation would be a “transitory” phenomenon.
Despite all the “transitory” talk, inflation continued to climb, hitting 8.6 percent in March 2022, when the Federal Reserve finally decided enough was enough and started hiking interest rates. Federal Reserve Chair Jerome Powell would later acknowledge that rates should have gone up sooner.
Since the Fed embarked on its most aggressive rate-hiking cycle since the 1980s, inflation has come down off the June 2022 peak of 9 percent, though recent data shows price pressures remain elevated—still substantially above the Fed’s 2 percent target.
Following the release of the latest price data, Ms. Yellen expressed regret for her earlier insistence that inflation would be “transitory.”
Bumpy Ride
While Ms. Yellen’s remarks are noteworthy, especially in light of the fact that data shows price pressures ticking up again, it’s not the first time she’s expressed regret for calling inflation “transitory.”“Inflation has come down,” she said at the time. “I think the word transitory suggests to many people that it’s something that’s a matter of days or weeks. And in our economy, it lasted for over a year. So I regret using the word transitory.”
In the Fox interview, Ms. Yellen was asked about the resurgent fears of stagflation, given that any progress on bringing down inflation seems to have stalled.
“I don’t think we’re going to see stagflation,” Ms. Yellen said. “Most forecasters believe we’re on a path where inflation will come down over time.”
She predicted that the single biggest contributor to inflation, namely the cost of rental housing, would move down this year. Still, perhaps informed by the hindsight of her inaccurate “transitory” inflation call, Ms. Yellen cautioned that the path towards normalcy would be bumpy.
“I wouldn’t expect this to be a smooth path month to month, but the trend is clearly favorable,” she told Fox.
President Joe Biden’s “top priority” is addressing inflation, she insisted.
House Speaker Mike Johnson (R-La.) was quick to criticize the proposal, saying it reflected an “insatiable appetite for reckless spending” and a “disregard for fiscal responsibility.”
Recent polling from Reuters/Ipsos shows that 40 percent of voters think former President Donald Trump would handle the economy best, compared to 31 percent who believe President Biden would do better on economic issues.