Treasury Secretary Janet Yellen says the economic recovery is going to be “bumpy” by the end of this year with high inflation readings
WASHINGTON – Treasury Secretary Janet Yellen says the economic recovery is going to be “bumpy” by the end of this year with high inflation readings.
But Yellen stressed that inflationary pressures would be temporary and if they threaten to be inherent in the economy, the government has the tools to address that threat.
In testimony before a House Appropriations Subcommittee on Thursday, Yellen was asked about the big jump in prices reported last week that saw the Consumer Price Index rise 4.2% over the previous year, since 2008. The biggest gain is 12 months.
Yellen said the April price increase was a result of several specific factors related to the economy’s opening up. She said that as she has said in the past that the price increase would be temporary but she indicated that it would be more than a one-time gain.
Yellen told MPs, “I expect it to last several more months and to see a higher annual rate of inflation by the end of this year.”
“As the economy gets back on track, it’s going to be a difficult process,” Yellen said.
High April inflation readings, Yellen said, are reflected in large gains in airline tickets, hotel rooms and all areas of entertainment, in all areas where prices fell dramatically after the epidemic in the US in March 2020.
In addition, Yellen said that supply chain shortages were leading to higher prices in key areas such as computer chips and auto production, where temporary factories were closed during the epidemic.
“We have an economy that was affected by a very serious and unusual setback. It made very significant changes in spending patterns,” he said.
Yellen stated that he began studying economics and began his professional career during the 1970s, the last period of high inflation in this country.
“I remember what that terrible period was like. Nobody wants to see this happen again,” he said. “We have to see the current situation very closely.”
Yellen was testifying to the Treasury Department’s budget request for the following year. The Biden administration will issue its full 2022 budget request on Friday.
The administration’s budget calls for a significant increase in funding for the Internal Revenue Service, an agency under the Treasury Department. Yellen said the increased funding was needed to boost the IRS’s efforts to reduce the tax gap, which is the amount of payments it said could total $ 7 trillion over the next decade.
“Many of the nation’s wealthiest taxpayers do not pay their full tax bills and the IRS does not have enough staff to ensure compliance,” Yellen said.
She said that the IRS currently has fewer auditors than at any time since World War II.