By Alessandro Albano
Investing.com – Biden administration’s new $ 4 trillion spending plan would benefit the US economy even though it could translate into higher inflation and interest rates. This was stated by US Treasury Secretary Janet Yellen in an interview with Bloomberg.
“If we ended up having a slightly higher interest rate environment, it would be an advantage from a society point of view and also for the Fed,” Yellen said, adding that “any price swings that come with it. from the rescue package it will vanish next year “.
The new aid proposed by the US government, which would amount to about $ 400 billion annually, would not be enough to lead to sustained inflation over time, according to the former Federal Reserve chairman.
“When the pandemic broke out, prices in the most affected service sectors plummeted completely, and we are now in the months when those pronounced declines, which were lowering annual inflation rates, make year-over-year comparisons difficult.”
“We have been fighting for a long time against inflation that has been too low for a decade now – he stressed – and we are entering a phase in which our economy is recovering and some of those prices are returning to normal”.
The Treasury owner made a comparison with air fares, which have increased “at a very high rate, but it is a return to normality”. “Air fares are still below the pre-pandemic level, and now, while that process of returning to normal is taking place, we will see some high rates of inflation, but it must be remembered that we have seen very low prices.”
For the former Fed number one, therefore, an increase in prices “is part of what’s happening”, highlighting that on the other hand there are “supply bottlenecks affecting entire sectors of the economy”, such as shortage of semiconductors which “is obviously affecting vehicle prices and used vehicle prices”.
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