Yellen calls market reaction to inflation data a ‘tremendous mistake’
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US Treasury Secretary Janet Yellen urged Americans to focus on the longer-term downward trend for inflation, a strong economy and rising wages, rather than focusing on “minor fluctuations“.
PHOTO: REUTERS
DETROIT - United States Treasury Secretary Janet Yellen said on Feb 14 that recent consumer price inflation data was “a tad higher” than expectations,
“I think it is a tremendous mistake to focus on minor fluctuations and to have failed to see the longer-term and bigger trends. And the trend here is that inflation is moving decisively down,” Dr Yellen told the Detroit Economic Club, where she appeared with Michigan Governor Gretchen Whitmer.
The Labour Department reported on Feb 13 that the consumer price index (CPI) rose 0.3 per cent in January, more than the 0.2 per cent gain expected by economists in a Reuters poll, prompting a decline in stock prices as Wall Street speculated on a potentially longer wait for the Federal Reserve to start cutting interest rates.
Dr Yellen said the burst of inflation following the Covid-19 pandemic has subsided almost to levels consistent with the US central bank’s 2 per cent annual inflation target.
Battleground states
Dr Yellen was visiting Detroit on a swing through the election battleground states of Michigan and Pennsylvania to tout US President Joe Biden’s economic policies, including infrastructure, healthcare and clean energy investments, and try to persuade sceptical voters the economy is performing well, with falling inflation and historically low unemployment.
She said the price of gasoline has fallen by US$1.90 (S$2.50) a gallon from its high mark in 2022, shortly after Russia’s invasion of Ukraine, to under US$3 a gallon, while prices of other key goods also have fallen, despite higher housing costs.
“Eggs have fallen back to pretty close to pre-pandemic levels, new and used car prices and truck prices have declined as well, televisions – so some prices are falling,” she said.
Dr Yellen said Feb 13’s CPI report showed average hourly earnings went up over the last year by 1.3 per cent, with a 1.6 per cent increase for blue-collar workers.
She repeated Treasury research that workers earning the median US wage can afford the same basket of goods and services as in 2019, but with US$1,400 in savings left over.
Asked which person dead or alive she would like to have lunch with, Dr Yellen chose influential 20th Century British economist John Maynard Keynes.
“He changed the way all of us understand business cycles, public policy and financial markets. And a long time ago, Richard Nixon said, ‘we’re all Keynesians now,’” Dr Yellen said, adding: “He really had deep insights into how economies work.”
When asked the same question, Ms Whitmer, a Democrat, said she would choose Dr Yellen, whom she had introduced as an inspiring role model – “She is a badass. She eats, breathes and sleeps economics” – and because she had only been able to spend 10 minutes with the Treasury secretary before the event on Feb 14. REUTERS
