Treasury Secretary Janet Yellen has recently faced backlash after many criticized her recent comments on inflation as being out of touch with the average American consumer. Throughout the Biden administration, Americans have endured substantial price increases, particularly in essentials such as housing, energy, and food.
Yellen, a multi-millionaire with an estimated net worth of around $20 million, sat down for an interview with Yahoo Finance’s Jennifer Schonberger on the state of the economy and its wide-ranging influences.
Bringing up the price of groceries, Schonberger asked Yellen, “Have you been to the grocery store lately?” The treasury secretary responded, “I sure have — I go every week.” Schonberger further suggested that shopping for groceries can induce “sticker shock” before asking if the U.S. should promote agricultural investment.
“It’s sticker shock, isn’t it? Just when you look at shipping costs, those have come down, global food commodity prices have also come down, but food prices still remain high. Should the US invest in agriculture to boost the food supply in this country?” Schonberger asked.
Yellen quickly hit back, “No,” as the interviewer finished her question before suggesting that the price increases largely reflect labor market dynamics. “I think largely it reflects cost increases, including labor cost increases that grocery firms have experienced, although there may be some increases in margins,” she said.
Later in the interview, Yellen was asked about her forward-looking view on inflation, which has been persistently above the Federal Reserve’s Target rate despite attempts to reign it back in with contractionary monetary policy.
“So addressing an agriculture want to ask you about your overall outlook for inflation. Looked like it was stalling in the first quarter. We’ve gotten some better readings here in the second quarter, namely that cooler May CPI reading. We’ve got another inflation reading coming on Friday. Do you expect inflation will fall at a faster rate as we go through the summer months and the rest of the year, or is it going to continue to be sort of a slower slog?” Schonberger asked. Watch the interview below:
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While conceding that there is monthly variation in the data, Yellen expressed a hopeful view that the Fed will tame price increases within its target within the next year. She said, “Well, I do expect inflation to come down, and as we get into next year, I believe that inflation will go back to the Fed’s 2% target.”
Moreover, Yellen was asked when Americans could expect interest rates start to decline, where borrowing costs have been elevated for the past several years. The treasury secretary stressed that the Fed will weigh the prospect of interest rate cuts with its goal of maintaining full employment, but hinted that the central bank could slash rates this year or next.
“Well, I’m not going to speculate on what the Fed is going to deem appropriate. They said interest rates in order to make sure inflation comes down. But also to keep the economy operating near full employment. And their projections suggest that most members of the committee envision that there will be some interest rate cuts later this year or next year, but it’s really depends on how the data unfolds with respect to the economy,” she said.
Schonberger further pressed Yellen if she thought the U.S. was at risk of an impending recession if interest rates continue to remain at current levels, indefinitely cooling the economy. Yellen opined that she believes the U.S. has a “good strong economy” and that the Fed intends to prevent a recession.
Note: The featured image is a screenshot from the embedded video.