U.S. Treasury Secretary Janet Yellen said on Tuesday that she was wrong in the past about the path inflation would take, but said taming price hikes is President Joe Biden's top priority and he supports the Federal Reserve's actions to achieve that.
Still, Yellen told CNN's Wolf Blitzer, "We can't rule out further shocks."
On ABC's "This Week March 14, 2021, Yellen said, "Is there a risk of inflation? I think there's a small risk, and I think it's manageable," and she said to The Wall Street Journal on May 4, 2021, "I don't anticipate that inflation is going to be a problem. But it is something that we're watching very carefully."
Asked by Blitzer whether she was wrong to downplay the threat that inflation posed in public statements over the past year, and whether her comments contributed to the current problems,Yellen said: "I think I was wrong then about the path that inflation would take.
"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 fully understand," Yellen added.
Yellen blamed her bad prediction on "further variants of COVID that have impacted our economy; Russia's war on Ukraine, which have boosted energy and food prices globally; and the lockdowns that have occurred in China."
She pointed to a "tremendously strong" recovery that has "brought our economy back to full employment, creating 8.3 million jobs since President Biden took office. Layoffs have declined to very low levels."
Unemployment is as low as it's been during the post-war period at 3.6%, she noted, and the labor market is "arguably the strongest we have seen it, and now we're in a period of transition." But, she added, "We're not expecting to see the same kinds of job gains, monthly job gains or growth figures going forward."
"So really, the shocks to the economy have continued, but inflation is the No. 1 concern for President Biden," Yellen said.
Biden "believes strongly and is supportive of the independence of the Fed to take the steps that are necessary" to reduce inflation, Yellen added.
Biden met earlier on Tuesday with Fed Chair Jerome Powell and underscored that he "respects the independence of the Federal Reserve," a White House official said.
Yellen said the Biden administration was taking action to try to supplement the Fed's effort by reducing the cost of prescription drugs and health care and by pushing proposals in Congress to boost the use of renewable energy.
Asked whether inflation would get worse in the short term, Yellen tried to sound optimistic.
"Well, you know, 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."
Still, she said, oil prices are high and Russia continues to wage war against Ukraine.
"We're trying and the Europeans are trying to address that and limit (Russian President Vladimir Putin's) ability to wage this war. There can be impacts on energy and food prices that, you know, we can do everything we can domestically to control." she said.
Biden has authorized "historic releases of oil from the strategic petroleum reserve," she added, "But we can't rule out further shocks."
Reuters contributed to this report.
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