Treasury Secretary Janet Yellen warned there could be another year of high inflation amid the uncertainty caused by the invasion of Ukraine. Prices have soared at their fastest pace in 40 years over the last 12 months.
“We’re likely to see another year in which 12-month inflation numbers remain very uncomfortably high,” Yellen said in an interview with CNBC. Yellen, who previously said she expected rising prices to ease in the second half of the year, said Thursday she does not want to make a prediction about the second half of this year.
The latest data from the Labor Department show consumer prices climbed 7.9% in February from a year ago, the largest annual increase since January 1982. Prices were up 0.8% last month, an acceleration from January as energy prices spiked with the Russia-Ukraine crisis.
Yellen said Thursday the situation in Ukraine has exacerbated inflation, driving what she called a “very meaningful increase in gas prices.” She said she anticipates that next month will show “further evidence of an impact on U.S. inflation of Putin’s war on Ukraine.”
Apart from oil, the Treasury secretary noted Ukraine and Russia are major producers of wheat, which could affect the cost of food. Russia is a major exporter of nickel and other minerals, which could drive increases in other prices both in Europe and the United States.
Americans had been struggling with high inflation even before the invasion, as the United States deals with supply chain bottlenecks and shortages coming out of the coronavirus pandemic. Inflation was up 7.5% year-over-year in January.
Despite the largest price increases the United States has seen in 40 years, Yellen said the economy remains strong and she does not anticipate the U.S. will experience stagflation.
“Stagflation usually means high inflation combined with a weak economy. And I think that the labor market will remain strong,” Yellen said.
The U.S. economy added 678,000 jobs last month, and more than 6.6 million jobs last year. The unemployment rate in February fell to 3.8%.
Americans also continue to quit their jobs at near-record numbers, signaling they’re confident in finding other employment.
White House press Secretary Jen Psaki said Thursday the administration is doing everything it can to reduce costs and make sure there isn’t a long-term impact from inflation. The Biden administration previously released millions of barrels of oil from the Strategic Petroleum Reserves to help ease high gas prices, and took steps to help move goods more quickly through ports as demand remains high.
Next week, the Federal Reserve is expected to increase interest rates to combat rising prices. Federal Reserve Chairman Jerome Powell said he would propose a 0.25% interest rate hike. He also did not rule out higher interest rate hikes at future Fed meetings.
Yellen, who previously served as the head of the Federal Reserve, said Thursday she has confidence in the central bank’s ability to make a “meaningful difference going forward.”
