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Yellen admits she was "wrong" about inflation in 2021

COVID and inflation slam small businesses
COVID and inflation slam small businesses 02:36

Washington — Treasury Secretary Janet Yellen told CNN on Tuesday that she was wrong when she said last year that inflation only posed a small risk and wasn't likely to be a problem.

Yellen made the comments to Wolf Blitzer, after the host replayed clips of Yellen calling the risk of inflation "small" and "manageable," and said she didn't "anticipate that inflation is going to be a problem." Federal officials called inflation transitory in the past, but since then, inflation has reached levels not seen in 40 years, with the Federal Reserve and policymakers struggling to bring it down. 

"Well, look, I think I was wrong then about the path that inflation would take," Yellen said Tuesday. "As I mentioned, there have been unanticipated and large shocks to the economy that have boosted energy and food prices, and supply bottlenecks that have affected our economy badly that I didn't at the time didn't fully understand. But we recognize that now."

"The Federal Reserve is taking the steps that it needs to take," she added. "It's up to them to decide what to do. And for our part, President Biden is focused on supplementing what the Fed does with actions we can take to lower the costs that Americans face for important expenditures they have in their budgets. Prescription drugs is one example. Health care costs, another example. Utility bills," she added.

Yellen said that inflation appears to be stabilizing, but warned that Russia's war on Ukraine could still have some volatile effects on the U.S. and global economy. 

"Core inflation has come down," she said. "It's still too high, but in recent reports, we have seen it move down, and that's an encouraging sign. But oil prices are high. Russia continues to wage war against Ukraine. We're trying and the Europeans are trying to address that and limit [Putin's] ability to wage this war. There can be impacts on energy and food prices that we can do everything we can domestically to control. The president has authorized historic releases of oil from the Strategic Petroleum Reserve. but we can't rule out further shocks," Yellen said. 

Inflation continues to be one of the most pressing concerns for voters heading into November's midterm elections. And consumers expect costs to climb more than 7% in 2023, according to a recent report from the Conference Board, a business group. What remains to be seen is whether the Federal Reserve, as it raises interest rates, can navigate a soft landing and avoid a recession.

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