Yellen says COVID spending could have contributed ‘little bit’ to inflation

WASHINGTON (Reuters) -The Biden administration’s spending on stimulus to maintain the financial system going through the COVID pandemic could have contributed somewhat bit to inflation, U.S. Treasury Secretary Janet Yellen mentioned in an interview on CNBC on Wednesday.

Yellen mentioned provide chain points and shortages had been the primary issue driving up costs through the pandemic, however conceded that stimulus spending may have performed a job as effectively.

“It could have contributed somewhat bit to the inflation, however by and huge, inflation was a provide facet phenomenon,” Yellen mentioned, in a uncommon concession by Biden administration officers in regards to the position their insurance policies performed in driving up costs.

The Treasury secretary, who leaves workplace later this month, mentioned she remained satisfied that the spending had been wanted to forestall scarring seen after earlier downturns when enterprise closures and layoffs end in folks being unemployed for lengthy durations and wind up turning into alienated from the workforce.

Value will increase had been largely as a consequence of shortages of products coming from China and different international locations that had additionally shut down, which left automakers and others with inadequate semiconductors and different elements to supply items.

Yellen mentioned there had not been a lot progress in decreasing costs in latest months, however she remained satisfied that the U.S. was on a “downward path.”

She mentioned the labor market had cooled however was in an excellent state, and up to date U.S. financial information steered that rates of interest may stay larger than folks had anticipated.

However she mentioned there was additionally elevated uncertainty about the way forward for financial insurance policies as President-elect Donald Trump prepares to take workplace on Jan. 20.

Total, she mentioned, the U.S. financial system was doing very effectively, with strong client spending and funding regardless of larger rates of interest.

However she mentioned it was crucial to place fiscal coverage on a sustainable course, and added that strikes to derail the modernization of the Inside Income Service may end in an $800 billion hit to the deficit.