In her latest interview with CNBC, US Treasury Secretary Janet Yellen provided information about the current state of the economy, touching on a variety of topics from inflation and interest rates to fiscal policy and government spending.
Yellen acknowledged that spending during the COVID-19 pandemic may have contributed to some inflation. However, she noted that the underlying cause of inflation was supply shortages across various sectors. “We haven’t seen much progress on inflation over the last few months,” she said, signaling that the issue remains a pressing concern for policymakers.
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Yellen: “Interest Rates May Remain Higher Than Projected”
Despite concerns about inflation, Yellen noted that the labor market, despite cooling from its peak, was “still in good shape.” Recent data suggests interest rates could be running higher than previously anticipated, she said. She also noted that the term premium on long-term interest rates is beginning to normalize, a potential sign of stability in financial markets.
Yellen called for fiscal policy to follow a sustainable development path and said the modernization of the IRS should proceed as planned. She expressed disappointment that President Joe Biden’s administration and Congress have not cooperated on more significant deficit-reduction measures. “I hope the new administration will take the deficit seriously,” she said, while acknowledging the difficulty of implementing significant budget cuts to essential programs.
*This is not investment advice.