In an interview broadcast on Wednesday, Treasury Secretary Janet Yellen stated that the US economy is not expected to experience stagflation, a situation where economic stagnation coincides with rising costs. Yellen noted that most forecasters anticipate inflation to decrease as housing costs decline. She mentioned that in many areas of the country, rental prices for new apartments have actually gone down overall.
Yellen’s remarks came after JPMorgan Chase CEO Jamie Dimon raised concerns about the possibility of stagflation. Yellen emphasized that housing costs are the primary factor contributing to the country’s inflation. She expressed confidence that housing costs will decrease this year and alleviate price pressures. Yellen acknowledged that previously stating that US inflation was “transitory” was a mistake, as price increases have not subsided as quickly as expected.
Despite a decrease in consumer inflation from its peak in 2022, it unexpectedly rose in February to 3.2%. Yellen suggested that some consumers are spending more on credit cards as they use up savings, but she views this as a normalization process rather than a concerning trend. She also highlighted the strength of the US dollar as the world’s reserve currency due to the depth of US financial markets, the liquidity of US Treasuries, and the institutional and legal framework supporting the dollar’s use.
During a trip to Kentucky, Yellen focused on investments in clean energy and manufacturing, attributing the increase in such funds to President Joe Biden’s policies. Yellen stated that since the beginning of the Biden administration, companies have announced nearly US$650 billion in investments in clean energy and manufacturing nationwide. She also mentioned that the Treasury Department will enhance efforts to educate cities on the benefits of tax credits from the Inflation Reduction Act.