“I think I was wrong then about the path that inflation will take,” Yellen told CNN’s Ulf Blitzer in The Situation Room when asked about her 2021 comments that inflation is only a “small risk.”
The recognition was the latest indication that the administration’s expectations of normalization of the economy have been thrown into chaos by the ongoing pandemic and war in Europe.
“As I mentioned, there were unexpected and big shocks in the economy, which raised energy and food prices and bottlenecks in supply, which had a bad effect on our economy, which I – at the time – did not fully understand, but now we realize.” she said.
Yellen and other White House officials once cited inflation as a temporary side effect of the economy returning to normal after the pandemic, pointing to supply and demand difficulties ahead of supply.
Yet months later, inflation has been at its peak for nearly four decades.
Recent economic indicators have raised optimism that inflation may have peaked at 40 in March, although economists warn it could take a long time before inflation returns to healthy levels. In response, the White House is launching a month-long effort to signal a focus on the economy.
The pressure began Monday with a publication by President Joe Biden in The Wall Street Journal and continued on Tuesday with a sitting in the Oval Office between Biden, Federal Reserve Chairman Jerome Powell and Yellen.
The finance minister said Biden had told the meeting that he “shares the Fed’s priority in reducing inflation and that he strongly believes in his support for the Fed’s independence in order to take the necessary steps”.
The Powell Fed leader has been criticized for slowly tackling high inflation by ending urgent support for the economy and raising interest rates. However, the Fed has promised to raise interest rates quickly and earlier this month raised interest rates by half a percentage point for the first time since 2000. The US Federal Reserve is signaling a further aggressive rise in interest rates in the coming months. Beyond Yellen, a number of other economic aides flooded cable news, hoping to convey the message that Biden is committed to lowering gasoline, food and housing prices, which has led to a drop in his approval rating.
The president, Yellen said Tuesday, knows “what an important and enormous burden inflation puts on US households.”
CNN’s Matt Egan contributed to this report.
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