Janet Yellen admits she was ‘wrong’ about inflation threat

US. Treasury Secretary Janet Yellen (in the photo) conceded she was “wrong” last year about the threat posed by rising inflation.

“I think I was wrong then about the path that inflation would take,” Yellen told CNN on Tuesday (local time). Until the first half of 2021, she believed the soaring inflation was only a temporary phenomenon related to the economic recovery from Covid-19 pandemic.

Secretary Yellen added that “There have been unanticipated and large shocks to the economy that have boosted energy and food prices and supply bottlenecks that have affected our economy badly that I didn’t — at the time — didn’t fully understand.” As the Joe Biden administration recognizes their shortfall in responding to inflation, the Fed is expected to expedite its grip on tightening the economy. It is highly likely that the Fed would take another big step as it did in May, to raise interest rate by 50 percentage points during the Federal Open Market Committee on June 14 and 15.

While it was an unusual case for President Biden to meet with Chair of the Federal Reserve, he met Jerome Powell on the same day to discuss inflation issue. “My plan to address inflation starts with a simple proposition: respect the Fed, respect the Fed’s independence,” President Biden told reporters before the meeting. “The Fed have noted at this moment they have been laser-focused on addressing inflation like I am.”


Jae-Dong Yu jarrett@donga.com