Treasury Secretary Janet Yellen said the recent price hike will subside and the U.S. labor market, while improving, still has some way to go before it regains its pre-pandemic strength.
“We’re seeing some inflation but I don’t think it’s permanent,” Yellen said at a press conference on Saturday after the G-7 finance meeting in London. “At least year over year we will continue, I think, for the rest of the year to see higher inflation rates – maybe around 3%.”
Yellen warned, however, that officials are still watching price increases closely. “I do not mean to say that it is an absolutely made and closed decision. We will monitor this very carefully, keep an eye on it and try to resolve any issues that arise if it becomes necessary, ”she said.
The inflation debate has intensified in recent months, with those like Yellen arguing that the current price increases are due to anomalies created by the pandemic – such as supply chain bottlenecks. and increased spending as economies reopen – and critics who say trillions in government aid could fuel a lasting surge in costs.
The aggregate measure of consumer prices rose 4.2% in the 12 months to April, and the figures for May are expected to be released on Thursday.
“I personally think this represents transient factors,” Yellen said, adding that the policy should go beyond these factors.
Yellen spoke after the G-7 meeting, where policymakers reached agreement on a global minimum tax for some of the most profitable companies.
Read more: The G-7 reaches historic agreement to overhaul taxation in the digital age
“There are concerns about fiscal sustainability and there is a clear desire to start removing accommodation measures when things get back on track,” Yellen said. “We believe most countries have fiscal space.”
As the recovery takes hold, millions of people in the United States have again lost their jobs during the pandemic and have yet to re-enter the workforce, Yellen said.
“We shouldn’t expect this process to be over in a month or two,” she said, but added that the United States could return to full employment by next year.
US job growth accelerated in May – along with workers’ wages – and the unemployment rate fell to 5.8%, according to a Department of Labor report Friday.