U.S. Treasury Secretary Janet Yellen.

(European News Agency)

[Financial Channel/Comprehensive Report] U.S. Treasury Secretary Janet Yellen (Janet Yellen) said that once the distortions during the epidemic that caused prices to soar subside and price pressures cool down, persistently weak inflation may once again become a challenge for the economy and policymakers. long-term challenges.

"Bloomberg" reported that Yellen pointed out in an interview that the United States has just gone through an unusual and difficult period, but Yellen believes that the United States will not return in any form to the era of rising prices and wages in the 1970s and 1980s .

Unlike in the 1970s and early 1980s, Yellen said that the current high inflation has not triggered a spiral of wages and prices, and inflation expectations have remained solid.

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While the central bank still has a long way to go to rein in the worst inflation in decades, with prices falling, the focus now turns to what happens when the fight is over.

Whether in economics or politics, the stakes for mistakes are high.

Yellen and Federal Reserve Chairman Jerome Powell and many in the economic establishment had wrongly forecast 2021 to be "temporary."

Yellen then admitted she had made a mistake in her judgment and backed the Fed's efforts to control prices by raising interest rates sharply.

The annual increase in the US consumer price index (CPI) reached 9.1% in June, and slowed to 6.5% as of last (12) months, in response to rising interest rates, easing pressure on supply chains and falling oil prices.

From 1992 to 2019, the Fed's preferred measure of inflation, the personal consumption expenditures index (PCE), grew at an average annual rate of 1.9 percent, below the Fed's current target and many policymakers fear that figure is too low, forcing rates close to zero. , and affect the central bank's ability to fight a recession by cutting interest rates sharply.

The trend of low inflation was broken by the epidemic, the supply chain was interrupted, the US government's aid pushed up demand, and Russia's invasion of Ukraine triggered a surge in energy and food prices.

Yellen said that the pandemic has caused unusual damage to the economy, there are many supply chain problems, the United States has hit a wall in many different areas, and prices have skyrocketed.

Yellen did not say how long it would take for inflation to return to target or how the Fed should respond.

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