Yellen Defends Pandemic Spending as Inflation Persists

Ms. Yellen did appear to veer away from the view of some Democrats that corporate greed and profiteering was a primary reason for rising prices.

Asked by Senator Charles E. Grassley, an Iowa Republican, about whether greed was to blame, Ms. Yellen demurred.

“I guess I see the bulk of inflation as reflecting supply and demand factors,” she said, sidestepping the issue of greed.

Throughout the last year, Ms. Yellen has largely been an ardent public defender of the Biden administration’s economic agenda. She has clashed publicly at times with critics such as Lawrence H. Summers, a former Treasury secretary, who warned that too much stimulus could overheat the economy.

For months, Ms. Yellen — and many other economists — talked about inflation as “transitory,” saying rising prices were the result of supply chain problems that would dissipate, and “base effects,” which were making the monthly numbers look worse in comparison with prices that were depressed during the early days of the pandemic.

By May of last year, Ms. Yellen appeared to acknowledge that the Biden administration’s spending proposals had the potential to overheat the economy. She noted at The Atlantic’s Future Economy Summit that the policies could spur growth and that the Fed might have to step in with “modest” interest rate increases if the economy revved up too much.

“It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat, even though the additional spending is relatively small relative to the size of the economy,” Ms. Yellen said.

Article source: https://www.nytimes.com/2022/06/07/us/politics/inflation-yellen.html