Treasury Secretary Janet Yellen admitted Thursday that inflation is “unacceptably high” in her first public comments since the release of federal data showing prices surged by a four-decade high of 9.1% in June.
Yellen signaled her support for the Federal Reserve to aggressively hike interest rates to address the problem – even as investors increasingly expect the central bank to enact a historic full-percentage point hike to tame prices that have surged at their sharpest rate since 1981.
“We’re first and foremost supportive of the Fed’s efforts — what they see, deemed to be necessary to get inflation under control,” Yellen said during a speech in Bali, Indonesia, according to a transcript released by the Treasury Department.
“And beyond that, we’re taking our own steps that we believe will be supportive in the short term to get inflation down, particularly what we’re doing on energy prices, the Strategic Petroleum Reserve.”
Fed fund futures suggest that investors view it as more likely than not that the central bank will enact at full-percentage point hike at a meeting later this month. Bloomberg reported a hike of that magnitude would be the largest since the Fed began using overnight interest rates to dictate policy in the early 1990s.
When asked about the risk of a recession as the Fed hikes rates, Yellen said the fight against inflation “should be the top priority.” She noted that the labor market remains strong despite Fed policy tightening over the last several months.
Yellen added that higher energy prices accounted for “almost half” of the uptick in the June inflation report – and called for Western allies to implement a price cap on Russian oil to prevent further disruption to the global energy market.
“A price cap on Russian oil is one of our most powerful tools to address the pain that Americans, and families across the world, are feeling at the gas pump and the grocery store right now,” Yellen said.
“A limit on the price of Russian oil would deny Putin revenue his war machine needs and would build on the historic sanctions we have already implemented that make it more difficult for him to wage his war or grow his economy,” she added.
Both Yellen and President Biden have faced widespread criticism over their response as inflation took hold in the US economy. Republicans argue that Biden’s policies, including his support for massive COVID-19 stimulus packages, have exacerbated the problem.
Meanwhile, Yellen recently admitted that she was wrong to initially dismiss inflation as a “transitory” problem.