US Treasury Secretary Janet Yellen said President Joe Biden should push forward with his $4 trillion spending plans even if they trigger inflation that persists into next year and higher interest rates.
“If we ended up with a slightly higher interest rate environment, it would be a plus for society’s point of view and the Fed’s point of view,” Yellen said Sunday in an interview during her return from the G7 finance ministers’ meeting in London.
The discussions around inflation have been intense in the last few months. Some argue that temporary issues created by the pandemic caused current price increases. These include supply chain bottlenecks and an increase in spending as economies reopen and other critics who say trillions in government aid could fuel a lasting spike in costs.
Biden’s packages would add up to $400 billion in spending per year, Yellen said, that’s not enough to cause an inflation over-run. Any increase in prices resulting from the rescue package will fade away next year, she said.
Jerome Powell, who took over at the central bank in 2018, has expressed to investors that he’s not considering pulling back support for the economy any time soon. Powell and his colleagues have continued to project their key interest rate at near-zero through 2023.
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