Yellen says she was ‘wrong’ about inflation path; Biden backs Fed move on price hikes

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US 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.

Asked in a CNN interview whether she was wrong to downplay the threat that inflation posed in public statements over the past year, Yellen said: “I think I was wrong then about the path that inflation would take.”

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“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 said, adding that the shocks range from Russia’s invasion of Ukraine to recent COVID-19 lockdowns in China.

“So really, the shocks to the economy have continued, but inflation is the number one 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 said, adding that unemployment was also nearly as low as it has ever been since World War Two.

A Treasury spokesperson said later: “The Secretary was pointing out that there have been shocks to the economy that have exacerbated inflationary pressures which couldn’t have been foreseen 18 months ago, including Russia’s decision to invade Ukraine, multiple successive variants of COVID, and lockdowns in China.”

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.

While she said a recent decline in core inflation data was encouraging, she noted that oil prices remained high and Europe was working on a plan to ban imports of Russian oil.

“We can’t rule out further shocks,” Yellen said.

Read more: How inflation and tangled supply lines are gripping US economy