Yellen sees US housing costs coming down, enabling 2% inflation
US TREASURY Secretary Janet Yellen said that inflation is on a path towards the Federal Reserve’s 2 per cent target, and that she hopes the job market will stabilise as policymakers lower interest rates.
Asked on Thursday (Sep 26) in a CNBC interview whether she viewed US inflation as sufficiently under control, Yellen said “I do.” She said that she anticipates housing costs – the biggest component of cost increases for some time now – to come down, enabling 2 per cent inflation.
There’s “a little bit more slack” now in the US job market, Yellen also said. That’s after the unemployment rate climbed above 4 per cent this year and payroll gains slowed. Hopefully, the labour situation will stabilise as the Fed acts on the monetary-policy front, she said.
Yellen declined to comment on the pace at which interest rates should come down, while noting that Fed officials last week projected further cuts after their initial 50 basis-point reduction. It’s up to the Fed to decide, she said.
Asked about whether she monitors the US currency’s exchange rate, the Treasury chief said “of course I watch the value of the US dollar.”
Yellen said that she laid out her US dollar policy at the start of the Biden administration, stating that it’s up to markets to determine the value as officials pursued “a strong macroeconomic policy consistent with macroeconomic stability.”
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“It’s been a long time since the US has intervened in currency markets,” Yellen noted. She added that she could “imagine situations where markets are so disorderly, that intervention is called for, but as a normal matter, the US dollar is determined by markets and interest rate differentials globally have been important drivers of that.”
Yellen also reiterated that it will be important over time for the US to shrink the fiscal deficit in order to keep the cost of servicing US debt “manageable.” BLOOMBERG
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