U.S Treasury secretary Janet Yellen said that U.S's three-decade inflation high was the result of the Covid-19, and it can be controlled only if the pandemic is controlled.
Yellen said if U.S manages to control the pandemic soon, consumer prices could return to normal levels “sometime in the second half of next year”.
“The pandemic has been calling the shots for the economy and for inflation. And if we want to get inflation down, I think continuing to make progress against the pandemic is the most important thing we can do. I think it’s — it’s — it’s important to realize that the cause of this inflation is the pandemic,” Yellen said.
Official data released last week showed that inflation in U.S had reached a 31-year high. U.S consumer price index increased by 6.2% in October compared to the same month last year.
The Treasury secretary said the pandemic caused the spike in inflation because it “all but shut down our economy” and “led to a dramatic increase in demand for products.”
“The pandemic is really responsible, in its impact, for the inflation that we’re seeing,” she said.
“Households were unable to spend on services — going out to eat and traveling. They shifted as they stayed at home, worked more from home. They shifted their spending on to goods that led to a surge in the demand for products. And although the supply of products has increased in the United States and globally, not as much as demand,” Yellen said.
Acknowledging that there is a political cost to be paid for soaring inflation, Yellen said "And when gas rises - the average is now over $3 a gallon, in some places, quite a bit higher - Americans notice it and it- it makes- it makes a difference."
Responding to a question whether Trump era tariffs on Chinese goods has made prices expensive, Yellen said "It would make some difference. Tariffs do tend to raise domestic prices. We put those tariffs in place; President Trump and his administration did as a retaliation for unfair trade practices."-
Yellen added that U.S. Trade Representative Katherine Tai is revisiting phase one trade deal with China and recognizing Chinese "requests to reduce tariffs in some areas".
White House economic advisor Brian Deese said on Sunday that he and President Biden were not wrong months ago when they downplayed inflation as a short-term issue caused by the pandemic.
Speaking to CNN’s Jake Tapper, Deese claimed that Biden’s proposed $1.75 trillion social spending bill will help combat inflation by helping families reduce childcare and housing costs.
On being asked if President Biden erred in saying that inflation is a “short-term" issue, Deese replied. “I think what we have said consistently is that the pandemic and the economy are interlinked and certainly we saw just as the Delta variant posed real health challenges to the economy it also had economic impacts.”
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