What Yellen Whispers to the Fed About Rates
Yellen says higher interest rates would be a 'plus' for the US and the Fed
Treasury Secretary Janet Yellen said President Joe Biden should move forward with his $ 4 trillion spending plans even as they trigger continued inflation and higher interest rates.
"If we ended up with a slightly higher interest rate environment, it would actually be an advantage from the perspective of the company and the Fed," Yellen said Sunday in an interview with Bloomberg News during her return from the meeting of the Fed. finance ministers of the Group of Seven in London.
The inflation debate has intensified in recent months, among those who, like Yellen, argue that current price hikes are driven by transient anomalies created by the pandemic – such as supply chain bottlenecks and a spike in spending when economies reopen – and critics saying trillions in government aid could fuel a lasting spike in costs.
Biden's packages would add roughly $ 400 billion in spending per year, Yellen said, arguing that it's not enough to cause excess inflation. Any "spikes" in prices resulting from the bailout package will fade next year, he said.
"We have been fighting too low inflation and too low interest rates for a decade," the former Federal Reserve chairman said, adding that "we want them to return to" a normal interest rate environment, "and if that helps. a little to ease things, then it's not a bad thing – it's a good thing ”.
PURCHASES OF GOODS
The main measure of consumer prices rose 4.2% in the 12 months to April, and the numbers for May will be released on Thursday.
The Fed has pledged to begin scaling back the $ 120 billion monthly pace of its asset purchases only after there is "substantial further progress" on inflation and employment.
President Jerome Powell, who took over the central bank from Yellen in 2018, has been trying to convince investors that he is not considering withdrawing support for the economy anytime soon. Powell and his colleagues continued to project their key interest rate close to zero through 2023.
Job growth in the United States increased in May – along with workers' wages – and the unemployment rate dropped to 5.8%, according to a report from the Department of Labor on Friday.
"I will not give up on the next packages," said Yellen. "They are not intended as a stimulus, they are intended as investments to address the long-standing needs of our economy."
Finance ministers and G-7 central bankers held a phone call on May 28 that the group pressured Yellen over her views on inflation, according to a Treasury official. The group eventually agreed with its assessment that price spikes during the year are likely to be transient, said the official, who informed reporters on condition of anonymity.
Yellen said monetary policymakers can handle any potential rise in inflation if it arises.
(Article taken from the foreign press review of Eprcomunicazione)
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/che-cosa-sussurra-yellen-alla-fed-sui-tassi/ on Sat, 12 Jun 2021 05:45:49 +0000.