Yellen sees monthly inflation back in 0.2% range later in 2022

[WASHINGTON] Treasury Secretary Janet Yellen expects inflation to subside in the latter part of next year as more Americans get back to work, consumer demand shifts toward services and supply-chain issues abate.

"I would expect monthly inflation rates to move down to levels consistent with 2 per cent or thereabouts," Yellen said late Monday, participating virtually in a Greater Providence Chamber of Commerce event. She said she expects monthly gains in the consumer price index to come in around 0.2 per cent or 0.3 per cent in the second half of 2022.

That would be a fraction of the 0.9 per cent month-on-month surge recorded in October, when the annual rate hit 6.2 per cent - the fastest since 1990. Yellen said that's a result of the pandemic, and that she's confident in the newly appointed Federal Reserve team of Jerome Powell and Lael Brainaird to avert any return to 1970s type inflation.

"I'm not worried" about a return of 1970s inflation, Yellen said.

While wages are rising - by one measure at least - at the fastest pace on record, especially for lower-paid jobs, Yellen said that's not the major driver of inflation and she doesn't see a wage-price spiral playing out.

Pressures will normalise as labour-force participation picks up, though millions of Americans aren't working because of child-care issues or they retired early, she said.

BLOOMBERG