Out of the 8% inflation rate, 3% is attributed to COVID relief checks. But the models say it will come down as recent shocks stabilise.
We have explored alternative scenarios for the potential inflationary effects of ARP through resource pressures generated by new federal spending and its possible impact on the public’s beliefs about the federal debt. With most of our models, we find that resource pressures generally have small and transitory effects on inflation. However, one model grounded in data before 1990 shows there can be larger and more persistent effects. We also find that if ARP generates a change in beliefs about the likelihood that a portion of the federal debt will be inflated away, the effects on inflation will be small as long as individuals do not believe the chances of a switch in policy regime are high.
In another story, Janet Yellen explains:
U.S. Treasury's Yellen says Fed can bring down inflation without causing recession
WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen said that she believes the Federal Reserve can bring down inflation without causing a recession because of a strong U.S. job market and household balance sheets, low debt costs and a strong banking sector
Yellen told a U.S. House of Representatives Financial Services Committee hearing on Thursday that "all of those things suggest that the Fed has a path to bring down inflation without causing a recession, and I know it will be their objective to try to accomplish that."
U.S. Treasury's Yellen says Fed can bring down inflation without causing recession
WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen said that she believes the Federal Reserve can bring down inflation without causing a recession because of a strong U.S. job market and household balance sheets, low debt costs and a strong banking sector
Yellen told a U.S. House of Representatives Financial Services Committee hearing on Thursday that "all of those things suggest that the Fed has a path to bring down inflation without causing a recession, and I know it will be their objective to try to accomplish that."
Yellen said during the hearing on the Financial Stability Oversight Council's work that inflation was the "No.1 economic issue" facing the nation and the Biden administration.
"It's having a substantial adverse impact on many vulnerable households And we are laser-focused on addressing inflation," Yellen said, repeating the Biden administration's initiatives to hold down gasoline prices through large releases of crude oil from the Strategic Petroleum Reserve and efforts to unblock congested U.S. ports.
She deflected several attempts from Republican lawmakers to try to coax her to blame high inflation on the Biden administration's $1.9 trillion COVID-19 relief spending package last year.
Yellen said that various factors were fueling inflation, including spikes in energy prices due to Russia's invasion of Ukraine and continued pandemic-driven supply chain problems, and other countries were also experiencing high inflation.
"It does show that there are factors beyond spending in the United States that are critical to inflation," she said.
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