US Treasury secretary Janet Yellen said controlling Covid-19 was key to taming inflation, as Joe Biden’s administration tries to stop rising prices derailing the US economic recovery and the president’s legislative agenda.
“The pandemic has been calling the shots for the economy and for inflation,” Yellen said, speaking on CBS’s Face the Nation programme.
“And if we want to get inflation down, I think continuing to make progress against the pandemic is the most important thing we can do.”
Battling rising prices has become a focus of Biden’s economic team. Last week, the US consumer price index showed a 6.2 per cent gain in October from the previous year, its fastest increase since 1990.
Yellen said many workers remained cautious about the risks of catching the virus in their workplace, and outlined shifting demands from consumers associated with lockdown and new remote working patterns.
But she added that she expected spikes in the prices of goods such as used cars and petrol to abate by the second half of next year, if the pandemic is brought under control.
White House officials have been trying to damp price pressures by exploring ways of easing some of the supply-chain bottlenecks, from semiconductor shortages to delays at ports, that are raising costs. Biden this week spoke to large retailers including Walmart and Target to discuss ways they could reduce price pressures.
Yellen conceded that removing Donald Trump-era tariffs from Chinese imports “would make some difference” to inflation. “Tariffs do tend to raise domestic prices,” she said, but added that US trade representative Katherine Tai was “revisiting” the phase one trade deal with Beijing.
Last month the US trade representative’s office launched what it said would be “frank” talks with Beijing’s trade officials to discuss the “phase one” deal reached in 2020. Many of Trump’s tariffs on Chinese imports remain in place.
White House economic adviser Brian Deese on Sunday argued Biden’s $1.75tn social spending and climate bill would help control inflation by helping families with housing and childcare costs while offsetting its investments with tax increases on corporations and wealthy individuals.
“Inflation is high and it’s affecting Americans and their pocketbook and their outlook,” Deese said.
But Biden’s big spending bill has come under fire from Republican lawmakers who say it would fuel inflation. It has also been attacked by Joe Manchin, a centrist Democratic Senator who holds a key vote in a narrowly divided chamber, who has voiced concerns that the measures would raise prices even further.
Deese told ABC News he was “confident” Biden’s package would be passed by the House this week and move on to the Senate.
Inflation concerns are among the economic fears that have driven Biden’s popularity to new lows. A new poll by The Washington Post and ABC on Sunday revealed 70 per cent of Americans rated the economy negatively, including 38 per cent who said it was in “poor” condition. About half of Americans blamed Biden for high inflation.
The poll contained disturbing signs for Democrats in next year’s midterm elections. It found that if those elections were held today, 46 per cent of voters would support the Republican candidate for Congress, against 43 per cent for the Democrat.
The inflation worries also come at a time of potential transition for the US Federal Reserve, as Biden weighs whether to reappoint Jay Powell for a second term as chair or replace him. On Sunday, Yellen refused to be drawn on whether she supported Powell’s renomination.
“I’ve said that I think chair Powell has done a very good job of running the Fed, of addressing the issues, particularly that arose when the pandemic struck,” Yellen said. “But what’s important is that President Biden choose someone who’s experienced and credible and there are a range of candidates.”