The Fed must ensure that inflation does not become an “endemic disease” during the second Powell term

© Reuters. File photo: Secretary of the Treasury Janet Yellen attends the House Financial Services Committee hearing in Washington, USA on September 30, 2021. Al Drago/Pool via REUTERS

WASHINGTON (Reuters)-US Treasury Secretary Janet Yellen told CNBC on Monday that the Fed will play an important role in the long term during Jerome Powell’s second presidency to ensure that inflation is not maintained. Will “pop”.

Yellen said that she believes that Powell and Brainard’s nomination as vice chairman will win broad support from Congress. She believes that they have the ability to “make the right judgment” to balance the Fed’s dual tasks of maximizing employment and maintaining price stability.

“I think we really have to worry about inflation. It has reached the level most Americans worry about when they see it and their wallets when they go to the store to buy food or refuel their cars,” said Yellen, the chairman. The Federal Reserve from 2014 to 2018.

She added that she believes this is due to imbalances in supply and demand and economic bottlenecks that need to be resolved, and expressed belief that the price surge will subside.

“In the long run, the Fed needs to play an important role to ensure that this does not become an endemic disease. And I know he can be counted on to do this,” she said of Powell.

Yellen said that the U.S. economy is currently experiencing “strong growth” and will continue until next year. In view of falling unemployment, increasing household savings and other factors, the Federal Reserve will determine how much monetary support is needed.

“We have indeed seen in the market that with a strong U.S. dollar and generally low long-term interest rates, people believe that inflation will not persist or prevail in the U.S. economy for a long time. This is very important.”

She said that the Fed is preparing to use climate change analysis as part of its stress test because it “poses a significant risk to financial institutions.”

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