Yellen monitors two key indicators to determine if inflation is a temporary issue. Inflation expectations and rising wages for low-wage workers. She warned that rising wages for minimum-wage workers could lead to an “inflationary trend” if there was widespread over-demand for workers in the labor market.
“We don’t want the economy to be over-demanded, wage and price pressures, and endemic,” Yellen said. “If you look at wage increases, you can fall into a spiral of wage prices, so be careful.”
She added: “I don’t think it’s happening right now.
At the G7 meeting, Yellen frowned, saying inflation could be around 3% and even higher for the rest of the year. However, in an interview, she said her comments were misunderstood.She expected inflation to rise in the coming months, but then settled down to the Fed’s long-term target of 2% interest rates. Said that it would be consistent with.
“There is no evidence that inflation expectations are out of control,” Yellen said.
Critics suggest that the Biden administration’s extension of pandemic unemployment insurance is contributing to labor shortages by encouraging workers to stay home and collect generous benefits. At least 20 states have moved to discontinue benefits early to encourage people to return to work.
Yellen said differences in how states treat unemployment benefits could shed new light on dynamics, but have yet to see evidence that supplements are delaying job creation. She pointed out the lack of childcare and position permanently lost due to pandemics as reasons why employers in some sectors are likely to have difficulty finding staff.
“We wanted to support people,” Yellen said. “This shouldn’t be left forever.”
Yellen said the economy is improving, but the 7 million jobs lost since the pandemic have not yet recovered. Some may not return.
“At this point, the labor market is not tight,” she said.
Yellen won the Global Tax Deal. Now she has to sell it to Congress.
Source link Yellen won the Global Tax Deal. Now she has to sell it to Congress.