Yellen emphasized that the recent uptick in inflation seen over the past year was expected to cool off, and that this should not be interpreted as an indication that the economy is in trouble or that the Federal Reserve needs to adjust monetary policy.
Yellen has consistently cautioned that inflationary pressures, while welcome after years of weak growth, were likely to be transitory. Speaking at a virtual event held by The Wall Street Journal, she noted that it is “natural” for inflation to cool off as we progress through the recovery, and that policymakers need to make sure they do not misunderstand or misinterpret such data.
Yellen stated that the Federal Reserve will continue to monitor economic data closely and respond as needed, and argued that while it is difficult to predict the shape of incoming data, the Fed must be mindful of not overreacting when it comes to adjusting policy. She maintained that the Fed has the tools to act if necessary, and that the US economy is still in a good position.
In summary, Janet Yellen recently spoke about recent cooling CPI data and highlighted the importance of keeping it in perspective. She warned against overinterpreting such data and suggested that the Federal Reserve should be deliberate and careful when considering adjustments to monetary policy. Yellen also expressed confidence that the US economy remains in a favorable position and that the Fed has the necessary tools on hand to address any potential issues as they arise.
This article was contributed on Oct 23, 2023
