Janet Yellen, the Secretary of the United States Treasury, stated that there is still an issue with inflation, despite the fact that she reaffirmed her belief that there is a way to bring it down while still preserving a robust labor market.
The comments that Yellen made came after data that was released on Friday showed that the preferred inflation gauges of the Federal Reserve unexpectedly accelerated in January and that consumer spending surged after a slump at the end of the year. These findings added pressure on policymakers to continue increasing interest rates.
“Inflation continues to be a problem,” Yellen told Bloomberg News in an interview in Bengaluru, India, where she’s attending talks of the world’s top finance officials. “The data we’ve seen suggests it’s not yet under control, but it’s come down.”
After the most recent price data, Yellen gave the impression that her perspective had not changed. This is especially significant when considering the month-to-month volatility as well as the fact that inflation expectations continue to be constrained.
She remained steadfast in her belief that a gentle landing was still a distinct possibility due to the robust state of the job market and the absence of the kinds of pressures on households or the financial sector that had preceded previous economic downturns.
“I do believe that that’s possible and it’s what I hope the economy will experience and I don’t see any clear signs at this point that that possibility is becoming more remote”
Recent statistics have showed that the economy is off to a solid start in 2023, with employment growth, retail sales, and activity in the service sector all showing acceleration in the month of January.
The Federal Reserve’s route to managing prices and demand may be bumpier and lengthier than the data for late 2022 had previously indicated because expenditure is expected to remain sturdy even as inflation remains tenacious.
The numbers that were released on Friday, which indicated that the price index for personal consumption expenditures grew 5.4% from the same month a year earlier in January, highlight the dangers of chronically rising inflation. On Friday, bond rates increased while stock prices declined on Wall Street.
The Federal Reserve will have a more difficult time achieving its inflation target of 2% if consumer spending remains resilient and the remarkable health of the labor market continues.
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“Probably the supply-demand imbalances in the labor market need to diminish somewhat”
During two days of meetings of the Group of 20 finance ministers and central bank chiefs in Bengaluru, formerly known as Bangalore, Yellen sounded more optimistic about the status of the global economy than she did a few months ago when she made these statements.
She stated that putting an end to the war in Ukraine is the most essential thing for the economy of the world and warned that such threats might also influence the outlook for the economy here in the United States.
“Some of those same global forces apply to the US, and food, energy prices, impacts of the war”
“But also we’re in the phase of tightening monetary policy to address inflation.”
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