Yellen expects US inflation to be much lower by end 2023

US Treasury Secretary Janet Yellen says inflation will be much lower by the end of next year, as long as there are no unanticipated shocks to the economy. 

“I believe inflation will be lower,” Yellen said during an interview on Sunday on CBS’ 60 Minutes. “I am very hopeful that the labour market will remain quite healthy so that people can feel good about their finances and their personal economic situation.”

The US this year battled the worst inflation in four decades as the global economy dealt with post-pandemic demand and supply shocks following Russia’s war in Ukraine. After hitting a peak of 9.1 per cent in June, consumer inflation is expected to have slowed to 7.3 per cent in November from 7.7 per cent the previous month, according to economists surveyed by Bloomberg News before a government report on Tuesday (Dec 13). 

The Federal Reserve is then expected to raise its key interest rate by 50 basis points the following day, as well as signal further hikes are likely next year.

Asked about the US inflation picture, Yellen said she hopes the elevated prices will be “short lived,” adding that she’s seen positive signs including lower shipping costs and shortened lag times for deliveries. 

“We’re all aware that it’s critically important that inflation be brought under control and not become endemic to our economy,” she said. “We’re making sure that that won’t happen.”

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Yellen added that the economy remains prone to shocks, but that the banking system is healthy, along with the business and household sectors.

“There’s a risk of recession, but it certainly isn’t in my view something that is necessary to bring inflation down,” she said. BLOOMBERG