Yellen: ‘It’s Important to Put Inflation in Context of an Economy That is Improving a Lot’

Treasury Secretary Janet Yellen said Sunday on CBS’s “Face the Nation” that she thought it was important to put the recent rising prices in the context of an improving economy.

Partial transcript as follows:

MARGARET BRENNAN: You have said that inflation is likely to be with us until the second half of next year. Are you confident that prices for the average American will be down by the time we head into next November and Election Day?

YELLEN: Well, it really depends on the pandemic. 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. It shut- all but shut down our economy. It boosted unemployment to almost 15% and we’ve been opening up in fits and starts. And the pandemic is really responsible, in its impact for the inflation that we’re seeing. It led to a dramatic increase in demand for- for products. 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. You know, we- President Biden’s top priority after he was elected was, of course, vaccinations, trying to defeat the pandemic and get people back to work. We passed the American Rescue Plan, and when you think about what would have happened without that, I mean, what a success that unemployment has declined from almost 15% to under 5% now. Americans feel confident about the job market. Quits have increased up to record numbers, which is a sign that people are getting outside offers. They’re seeing wage increases. That is something that didn’t have to happen, and it really reflects the support that we gave to Americans to keep up their spending and make it through the pandemic. But with supply disruptions and this huge shift in- in- in demand toward products, we are seeing some broad-based price increases. We have shortages of semiconductors; that’s really caused new and used car prices to rise, car production to decline–

BRENNAN: Twenty-six percent year over year for used cars, gasoline up 50%, eggs 12%, milk 6%, coffee 6%. So when–

YELLEN: We are seeing some big increases in prices.

BRENNAN: When does it get better? When do those spikes abate?

YELLEN: You know, when the economy recovers enough from COVID, the demand patterns, people go back to eating out, traveling more, spending more on services, and the demand for products, for goods begins to go back to normal. And also, labor supply has been impacted by the pandemic. Labor force participation is down, it hasn’t recovered.

BRENNAN: Mhmm.

YELLEN: Probably many people remain concerned about the health consequences of working. Child care arrangements may be disrupted. But with- when labor supply normalizes and the pattern of demand normalizes, I- and I would expect that if we’re successful with the pandemic to be sometime in the second half of next year, I would expect prices to go back to normal.

BRENNAN: Because there could be a political cost to this, which is why I ask about November, of course.

YELLEN: Yes. Well, there’s an economic cost and Americans feel that. 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. But I just think it’s important to put inflation in context of an economy that is improving a lot from what we had right after the pandemic and is making progress.

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