U.S. Treasury Secretary Janet Yellen told Bloomberg News that a rise in the country’s interest rates is not at all a bad thing.
Yellen, supporting President Joe Biden’s $4 trillion spending proposal, said that would equate to approximately $400 billion per year and would be good in the long run – even with the rising rates.
Yellen’s view is consistent with G-7 finance heads and leading bankers who joined Yellen on their May 28 summit conference call.
According to a Treasury official who briefed reporters anonymously, the group sought Yellen’s appraisal and agreed with her that price spikes through the year are likely to be transitory.
The debate continues: One one side are those, such as Yellen, who believe current price increases are short-term because of such pandemic-related issues as supply-chain bottlenecks; on the other, those who say the trillions in government aid may mean long-term price spikes.
Yellen believes the world’s leading finance ministers and policy makers have the situation under control.
“I know that world — they’re very good,” Yellen said in the interview. “I don’t believe they’re going to screw it up.”
As former chair of the Federal Reserve, Yellen has a wealth of background experience and said the president’s plan would not cause an inflation over-run.
“If we ended up with a slightly higher interest rate environment it would actually be a plus for society’s point of view and the Fed’s point of view,” Yellen told Bloomberg.
“We’ve been fighting inflation that’s too low and interest rates that are too low now for a decade.”
Current Fed Chair Jerome Powell, who took over for Yellen in 2018, projects a key interest rate at near zero through 2023.