Yellen says Biden’s trillion-dollar plan is “small contributor” to inflation

The US President’s $1.9 trillion stimulus package, Joe Biden, March has contributed to strengthening demand but is only a small factor in current higher inflation rates, said the Treasury secretary, Janet Yellen, to congressmen this Wednesday (1).

Yellen told the House Financial Services Committee that the stimulus package clearly boosted demand, but that it’s not a “fair assumption” to say it went beyond what’s needed and fueled current spikes in demand. inflation.

“It’s certainly true that the American Rescue Plan put money in people’s pockets… and contributed to strong demand in the US economy, but if you look at the amount of inflation we have, and its causes, that’s at best a small contributor,” she said.

The high inflation, now more than twice above the flexible target of the Federal Reserve (Fed, US central bank) of 2% a year, is expected to decrease in the second half of 2022, said the president of the institution, Jerome Powell, to parliamentarians in hearing this Wednesday.

Asked by Republican lawmakers about the inflationary impact of Biden’s response, Yellen insisted that there was a “very good reason” to proceed with the stimulus package to address a shortage of demand, which could have resulted in high and long-lasting unemployment rates.

“It has been successful,” she said. “The plan really boosted demand, and that’s one of several factors that are involved in inflation.”

Yellen said the main driver of inflation was the pandemic of Covid-19 and its impact on “massive” shifting demand from services to goods, which has resulted in problems in the supply chain and also a lasting effect on labor supply.

She said Covid-19 had caused an “unusual shock” to the workforce and that health concerns had prevented many low-income workers from returning to their jobs.

For Yellen, however, this should decrease when the pandemic is controlled.