Treasury Secretary Janet Yellen and Fed chair Jerome Powell insist the inflation crippling the US economy is actually too much of a good thing, saying it's because markets weren?t anticipating such a quick recovery from Covid.
"We understood demand would be strong," Powell explained on Wednesday, but "didn't understand [the] significant problems of the supply side." Taking a defensive approach, he noted that the US wasn't the only country riled by sky-high inflation - though he himself didn't specifically name any others.
However, acknowledging that "substantial fiscal and monetary stimulus played a role" in feeding high demand during a House Financial Services Committee hearing on Wednesday, Yellen argued that it was Biden's 'American Rescue Plan' that had "put money in people's pockets, helped them meet expenses that they had, and contributed to strong demand in the US economy." The ARP was a $1.9 trillion stimulus bill signed by President Joe Biden in March.
At the same time, Yellen insisted the inflation was hardly caused by the ARP at all - instead it was "at most a small contributor," because its focus on "goods as opposed to services has contributed massively to the supply chain problems."
On Thursday, however, Yellen opted to officially retire the word "transitory" to describe the current state of inflation in the economy, admitting "that hasn't been an apt description of what we're dealing with" during the Reuters Next conference. Earlier, Powell had a similar suggestion.
At the same time, Yellen hinted she was willing to entertain the notion of central bank digital currencies, explaining the idea required a consensus while suggesting she'd be willing to visit China for ongoing "dialogue" that she expected to continue. Yellen made a point of saying she had no plans to leave her job, stating she was "enjoying it very much." She previously headed the Federal Reserve under ex-President Barack Obama.
The Biden administration has repeatedly sung its own praises regarding the Covid-19 recovery, insisting the US was the only country whose residents could count themselves richer than they had been before the pandemic. However, statistics show that most of the economic growth since 2020 has gone to the ultra-rich, while a net 21 million ordinary Americans have lost their jobs.
"It is the administration's agenda that is driving up the cost of things. It's making the American people worse off, not better off," ranking Financial Services Committee Republican Rep. Patrick McHenry (North Carolina) affirmed.