Treasury Secretary Yellen Concedes Rates May Have to Rise to Keep Economy from Overheating

Posted on 05/04/2021

U.S. Treasury Secretary Janet Yellen at an economic seminar (recorded on Monday, aired Tuesday) presented by The Atlantic conceded that interest rates may have to rise to keep a lid on economic growth brought on by stimulus spending. The remarks were made in the larger context of a speech where she also said inflation would not be an issue.

She added, “But these are investments our economy needs to be competitive and to be productive. I think our economy will grow faster because of them.”

After Yellen’s comments the Dow Jones Industrial Average slid 260 points.

Inflation is appearing in various categories such as gas prices, corn, lumber, and general food prices in the United States. Federal Reserve officials have said that after a brief rise in 2021, price pressures are likely to ebb. The Federal Reserve’s assurances to consumers to not worry about price increases due to it being “transitory” has not calmed down some investors concerned about inflation.

Federal Reserve Chairman Jerome Powell recently said that the primary tool to control inflation is through higher interest rates.

In 1998, the U.S. government revised how it calculate the Consumer Price Index (CPI). The CPI is calculated by analyzing the price of a “basket of goods”. The U.S. government can include or exclude items from the CPI.

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