Yellen urges Congress to do more to fight inflation

US Treasury Secretary Janet Yellen has urged Congress to pass new measures to help dampen ongoing price spikes, as pressure mounts on the Biden administration to do more to contain inflation the highest in four decades.

Lawmakers on the Senate Finance Committee asked Yellen on Tuesday about the state of the economy, which has rebounded rapidly from the depths of the Covid-19-induced crash but is now beset by soaring costs for nearly every goods and services.

“Congress can do a lot to mitigate some of the largest and heaviest costs that households face,” Yellen said, noting specific proposals to lower prescription drug prices, improve access to a affordable housing and to increase investment in renewable energy.

“By doing so, we will expand the supply of our economy,” she said. Investments in education and training, childcare as well as elderly care would lead to a larger workforce, she said, helping to lower inflation and leading to “strong and sustainable growth”. [and] stable growth”.

Yellen’s testimony comes just days after she admitted she was ‘wrong’ last year about the threat posed by rising inflation, after previously attributing price pressures to ‘transitory’ forces. such as supply chain bottlenecks and other Covid-related disruptions, as many private individuals have experienced. forecasters and the Federal Reserve.

She was also embroiled in controversy after excerpts from a new biography alleged that she originally wanted to cut last year’s $1.9 billion stimulus package by a third, from fear that this will drive up prices. Yellen has since refuted those claims.

The Treasury Secretary on Tuesday defended the measures taken by the Biden administration, but acknowledged that inflation is now at an “unacceptable” level and that “an appropriate fiscal stance is needed to complement the monetary policy actions of the Federal Reserve.

The US central bank has since March raised interest rates by 0.75 percentage points from near-zero levels that have been in place for two years and is set to offer at least two more rate hikes. half a point at its next political meetings scheduled for the next week and at the end of July. Market participants expect the Fed to eventually raise the federal funds rate to around 2.8% by the end of this year.

Asked by Steve Daines, the Republican senator from Montana, about the Biden administration’s role in driving up inflation, Yellen pushed back. “We see high inflation in almost every developed country in the world, and they have very different fiscal policies,” she said. “So it cannot be true that most of the inflation we are experiencing reflects the impact of the [stimulus package].”

She added, “When designing a policy, various risks need to be considered. Of course, inflation was part of it, but the overwhelming risk was that Americans would be marred by a deep and long recession.

Yellen said Tuesday that any new legislation must be funded or structured to reduce the deficit.

“Asking taxpayers and high-income businesses to pay their fair share is the right way to fund these investments,” she said, adding that tackling the estimated $600 billion gap year of taxes due but not paid, is “absolutely important for ensuring fiscal responsibility”.

“It would generate substantial revenue in an efficient and fair way,” she said. “This would reduce the deficit and help ease price pressures by providing some of the funding we need for the urgent budget priorities we have been discussing. »

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