Yellen Says Stimulus Unlikely to Cause Inflation Problem
(Bloomberg) -- Treasury Secretary Janet Yellen dismissed fears that President Joe Biden’s $1.9 trillion pandemic-relief bill is so big that it will cause an inflation problem, as she seeks to push the recovery deeper into the U.S. labor market to address long-standing economic disparities.
Yellen called the impact on women and minorities from Covid-19 “absolutely tragic.” She has repeatedly rejected concerns that Biden’s stimulus is excessive given the economy’s signs of recovery, and that run-away inflation could damage the economy.
“I really don’t think that’s going to happen,” she said Monday on MSNBC. Inflation before the pandemic “was too low rather than too high,” she noted. “If it turns out to be inflationary, there are tools to deal with that,” she said of the stimulus package.
Treasury yields have soared over the past month as investors built into their outlook a faster trajectory for economic growth and prices in the wake of the bigger-than-expected spending bill.
Yellen said the most urgent action is the House’s vote Tuesday on passing the Senate’s revisions to pandemic-relief bill. Speaker Nancy Pelosi has predicted approval.
That legislation includes enhanced unemployment benefits until Sept. 6 and stimulus checks for those earning $80,000 or less, and it makes student-loan relief tax-free.
“We have a K-shaped recovery going on, in which high-income people are doing much better than those at the bottom of the economic ladder -- low-wage workers and minorities,” Yellen said. The problem pre-dates the coronavirus but was “made immeasurably worse by the pandemic.”
The unemployment rate for Blacks, who have a disproportionate share of lower-wage jobs and of union membership, was double that of Whites during much of the past 50 years in part because policy makers historically pulled back support just as the benefits of growth started reaching lower-income workers -- to avoid runaway inflation.
Federal Reserve Chair Jerome Powell has pledged not to allow the same mistake to be repeated, while his predecessor, Yellen, is preparing to turn from crisis-relief efforts to jobs creation through what the administration calls a “build back better” program that includes infrastructure spending.
U.S. payrolls remain down by more than 9 million compared with the peak before Covid-19 struck. The Black unemployment rate climbed to 9.9% in February even as the overall rate fell to 6.2%.
Yellen reiterated her expectation for the relief plan to return the U.S. to “full employment” next year.
Kristalina Georgieva, who heads the International Monetary Fund, during an event with Yellen on Monday applauded what she called the U.S.’s “very progressive” policies.
Speaking on International Women’s Day, Yellen and Georgieva highlighted the importance of addressing inequalities faced by women -- and of bringing more of them into the field of economics.
Women “have to take care of children who can’t be at school. We’re really concerned about permanent scarring from this crisis,” Yellen said.
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