Secretary Yellen Defends Failure to Predict Inflation Would Rise and ‘Remain as Persistent as It Has’

Treasury Secretary Janet Yellen speaks in Dearborn, Mich., on Sept. 8, 2022. Paul Sancya/AP Photo

Treasury Secretary Janet Yellen on Tuesday insisted she was in “good company” in failing to forecast persistent and soaring inflation and blamed the increasing cost of living on a series of unpredictable “shocks” to the economy.

Yellen made the comments during an interview with CNBC’s Sara Eisen.

“I think, through a series of shocks that virtually no one could have predicted, including Russia’s invasion of Ukraine, that have pushed up prices, and a series of supply challenges that most people did not anticipate, including me, I think I was in good company in failing to see that inflation would increase and remain as persistent as it has,” the Treasury Secretary said.

“The Federal Reserve clearly understands the problem it faces. And we’re supportive of the actions that they’re taking to bring it down. It is President Biden’s top economic priority,” Yellen added.

Despite inflation at 40-year highs and Americans having to spend more for food, energy, and housing, Yellen, who has warned Americans to brace for a spike in gas prices this winter, insisted that the U.S. economy was “doing very well.”

“From the perspective of the United States, I think the United States is doing very well,” Yellen said, while pointing to a recent jobs report published by the Bureau of Labor Statistics, which she said showed a “very resilient” economy.

That jobs report showed that the U.S. added 263,000 jobs and that the unemployment rate moved down to 3.5 percent. Economists had forecasted 250,000 new jobs would be added.

Lowering Inflation ‘Still a Priority’

“So I remain encouraged the U.S. economy is strong. And as I’ve said on other occasions, I think there’s a path through. Obviously, inflation is too high, it’s a priority to lower it. I think there’s a path to accomplish that while maintaining a healthy labor market.”

Yellen’s comments come after the International Monetary Fund (IMF), on Oct. 11, lowered its global growth forecast for 2023, to 2.7 percent, down 0.2 percentage points from its outlook in July. The financial agency also warned of a potential global recession next year.

“The worst is yet to come, and for many people 2023 will feel like a recession,” said Pierre-Olivier Gourinchas, the IMF’s chief economist.

On Twitter, the IMF noted the pending economic crisis was being prompted by “higher-than-expected inflation, a worse-than-expected slowdown in China due to COVID-19 outbreaks and lockdowns, and the impact of Russia’s war in Ukraine.”

Also on Tuesday, Yellen addressed unconfirmed reports that President Joe Biden will be replacing her after the midterm elections in November.

Republicans have been calling for Yellen to step down or be removed from her position after she admitted in a June interview with CNN that she had been mistaken in her belief of how inflation in the United States would progress, after repeatedly stating that it was merely temporary.

“I plan to stay. I have never said that I intend to leave. I’ve heard those rumors, but I fully intend to stay,” Yellen said, before reiterating again that she has “no plan to leave” when asked how long she intends to stay in the position.