Treasury Secretary Janet Yellen has finally acknowledged that surging price levels are a lot higher than expected, but said that any such inflation will abate over the medium run.
In an interview with CNBC, Yellen said that the current surging inflation levels will likely increase even further over the next several months, before tapering off to normal levels. “We will have several more months of rapid inflation,” she said, adding that although it is not a one-month phenomenon, “over the medium term, we’ll see inflation decline back toward normal levels. But, of course, we have to keep a careful eye on it.”
However, she also expressed concern over the inflationary impact on the housing sector, particularly for lower-income households. The latest CPI print released by the Bureau of Labour Statistics showed that prices accelerated 5.4% in June, marking the sharpest increase in almost 13 years. Similarly, core CPI, which excludes volatile components such as food and energy, jumped 4.5%— the highest increase since 1991. At the same time, housing prices across major US cities soared almost 15%, according to most recent figures published by S&P CoreLogic Case-Shiller.
“I don’t think we’re seeing the same kinds of danger in this that we saw in the runup to the financial crisis in 2008,” Yellen explained. “It’s a very different phenomenon. But I do worry about affordability and the pressures that higher housing prices will create for families that are first-time homebuyers or have less income.”
Yellen’s latest comments came as Federal Reserve Chair Jerome Powell faced significant scrutiny from both House and Senate lawmakers regarding the central bank’s ultra-dovish monetary policy and the subsequent impact on the economy’s inflation levels. Although Powell did concede that the Fed “is not comfortable” with the current acceleration in price levels, he insists that the inflation conditions are directly related to the reopening of the economy, and will subside once the pandemic recedes.
Information for this briefing was found via CNBC. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.