THE US economy is not expected to see stagflation, Treasury Secretary Janet Yellen said in an interview broadcast on Wednesday, adding that most forecasters expect inflation to cool as housing costs move lower.
“In many parts of the country, rental prices for new apartments have actually declined overall,” Yellen told Fox Business in an interview.
Her comments came after JPMorgan Chase CEO Jamie Dimon recently refused to rule out the chance of stagflation, a dreaded scenario where economic stagnation meets rising costs.
Housing costs are the single biggest contributor to the country’s ongoing inflation, Yellen told Fox Business while on a trip to Kentucky to highlight President Joe Biden’s efforts to boost economic growth.
She stressed that she has “every expectation” housing costs will move down this year, easing price pressures.
When asked, she also said she regretted previously saying that US inflation was “transitory,” as it has taken much longer than a few weeks or months for price increases to cool.
Consumer inflation has fallen from a peak in 2022 but accelerated unexpectedly in February to 3.2 per cent, underscoring the bumpy path to bringing prices lower.
Although some consumers are spending more on credit cards, having depleted a portion of savings, Yellen said she sees this as “normalisation rather than a disturbing new trend.”
On the dollar’s reserve currency status, Yellen said: “there really is no rival in terms of the depth of US financial markets, the liquidity of US Treasuries, the institutional and legal structure underpinning the use of the dollar.”
In Kentucky, Yellen turned the spotlight on investments in clean energy and manufacturing, saying Biden’s key policies have helped bring more of such funds into communities that traditionally relied on industries like coal, among others.
Since the start of the Biden administration, “companies have announced almost US$650 billion in investments in clean energy and manufacturing across the country,” she said.
Speaking at an Advanced Nano Products factory in Elizabethtown, she added that the Treasury Department will boost outreach efforts to raise cities’ awareness on benefits like tax credits from the Inflation Reduction Act. AFP
