Yellen optimistic US inflation to ease further, but risks remain
US TREASURY Secretary Janet Yellen said she was optimistic that US inflation will decelerate further but warned that uncertainty remains.
“Gas prices have been falling for 80 days in a row, which is certainly good news,” Yellen told reporters on Thursday. “It caused headline inflation to actually go into negative territory in July, and I think there will be some further impetus in the next report.”
Yellen, who spoke during a trip to Detroit to talk up the economic accomplishments of the Biden administration’s first two years, added that “there are a lot of global uncertainties associated with Russia.”
Inflation, which is running at the hottest pace in almost four decades, is a crucial issue for the Biden administration as his Democratic Party approaches congressional mid-term elections in November.
High petrol and food prices earlier in the year severely dented the president’s popularity and the Democrats’ prospects for retaining control of Congress.
US central bankers are raising interest rates rapidly to counter red-hot inflation after being slow to respond as prices began to surge in late 2021.
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They hiked by 75 basis points at their meetings in June and July and have left the same again on the table when they next gather, or a smaller half-point move, depending on the data. Inflation was 6.3 per cent for the 12 months ending July, according to the Commerce Department gauge targeted by the Fed, which aims for 2 per cent inflation.
A separate Labor Department measure of consumer prices will be released on Sept 13.
Economists surveyed by Bloomberg expect it to moderate to 8.1 per cent in the year through August, from 8.5 per cent the month before.
“The Fed is taking action and is committed and will do what’s needed to get inflation under control, but I don’t want to make a quantitative guess as to where inflation is going over the next year,” the Treasury chief said.
Speaking at a Ford Motor electric-vehicle plant in Dearborn, Michigan, earlier in the day, Yellen reviewed what she saw as the Biden administration’s biggest accomplishments, including new legislation that invested in infrastructure, green technology, domestic semiconductor production and other goals.
She also pointed to unfinished business, saying the administration hoped to raise tax rates for the wealthy and corporations, and to increase federal government support for education and child care. BLOOMBERG
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