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Yellen says she sees no inflation problem after rate hike comments roil Wall Street

EconomyMay 04, 2021 10:50PM ET
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© Reuters. FILE PHOTO: U.S. Treasury Secretary-designate Janet Yellen in Wilmington, Delaware, U.S., December 1, 2020. REUTERS/Leah Millis

By Ann Saphir and David Lawder

(Reuters) - U.S. Treasury Secretary Janet Yellen said on Tuesday she sees no inflation problem brewing, downplaying earlier comments that rate hikes may be needed to stop the economy overheating as President Joe Biden's spending plans boost growth.

The initial comments made by Yellen, a former Federal Reserve chair, deepened a sell-off in tech stocks and pushed longer-dated Treasury yields higher.

"It may be that interest rates will have to rise somewhat to make sure that our economy doesn't overheat, even though the additional spending is relatively small relative to the size of the economy," Yellen said in taped remarks to a virtual event put on by The Atlantic.

"It could cause some very modest increases in interest rates to get that reallocation, but these are investments our economy needs to be competitive and to be productive (and) I think that our economy will grow faster because of them."

Later on Tuesday, Yellen told a Wall Street Journal CEO Council event that she does not anticipate that inflation would be a problem for the U.S. economy and that any price increases would be transitory because of supply chain shortages and the rebound in oil prices to pre-pandemic levels.

Asked directly about her remarks on rates, Yellen said she was neither predicting nor recommending a rate rise.

"If anybody appreciates the independence of the Fed, I think that person is me," Yellen said.

"I don't think there's going to be an inflationary problem. But if there is the Fed will be counted on to address them," she added.

Treasury bond yields have risen sharply this year, especially in the first quarter, on growing expectations for an economic recovery from the coronavirus recession.

"I don't think it was meant to be an impactful statement that yields will have to rise now," TD Securities interest rate strategist Gennadiy Goldberg, said of Yellen's initial remarks.

The yield on the benchmark 10-year Treasury note was 1.58% on Tuesday.

Fed officials, including Chair Jerome Powell, have said the move reflects confidence in the economy rather than expectations the central bank would start dialing back ultra-accommodative policy. Powell has said repeatedly the Fed is nowhere close to beginning that process.

Yellen said during The Atlantic event the main goal of Biden's programs is to help reverse decades of widening economic inequality.

The programs, which include stepped-up spending on infrastructure, childcare and education, will make a "big difference" to inequality, Yellen said.

Republicans have criticized the proposed tax increases Biden expects to use to pay for his proposals, but Yellen said the effect of a change in tax rates is "much less powerful in influencing growth in either direction," adding that her aim is to make sure government deficits "stay small and manageable."

Yellen says she sees no inflation problem after rate hike comments roil Wall Street
 

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Comments (19)
ZS Beck
ZS Beck May 05, 2021 8:47AM ET
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I don't see an inflation problem either, Everything costs twice as much, but it’s not inflation.it’s just happened.
Fun Fidgets
Fun Fidgets May 05, 2021 7:04AM ET
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She mentioned the words "rate hike" and the market goes down quickly. Imagine what happens when they actually have to do it. FED hs backed themselves into a corner.
Fun Fidgets
Fun Fidgets May 05, 2021 7:03AM ET
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She mentioned the words "rate hike" and the market goes down quickly. Imagine what happens when they actually have to do it. FED hs backed themselves into a corner.
Not buying
Not buying May 05, 2021 4:44AM ET
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that's a relief. glad she cleared that up. I'll have no problem sleeping tonight with folks like this steering the car.
Dave Jones
Dave Jones May 05, 2021 12:14AM ET
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is this thing even human?
Steve Lora
Steve Lora May 04, 2021 11:58PM ET
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Granny needs to not drink and give market statements at the same time
XAVIER ADOLF NORONHA
XAVIER ADOLF NORONHA May 04, 2021 11:44PM ET
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She is aiming for Fed Chair...or shows herself as boss!
Murali Brahmandam
Murali Brahmandam May 04, 2021 11:33PM ET
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yellen caused technical damage that she can't undo or retreat from
Tyrone Jackson
Tyrone Jackson May 04, 2021 11:33PM ET
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Anyone that believes a single word from this lady is going to get burned. She is paid to lie to the public. And look at her today haha. Backtracking within hours. She commits fraud . Who benefited from this Nasdaq shorts this morning? All of her cronies. What a joke the market has become.
Murali Brahmandam
Murali Brahmandam May 04, 2021 11:21PM ET
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what she said first is true. the retreat is cop out
stanley shalala
stanley shalala May 04, 2021 11:14PM ET
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What a bxtch.
Javier Escamilla
Javier Escamilla May 04, 2021 11:12PM ET
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Sounds like she did a favor to someone lol
BB To
BB To May 04, 2021 8:24PM ET
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Is it kind of market manipulation?
Renzo Francesqui
Renzo Francesqui May 04, 2021 8:24PM ET
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for me it is
Manish Manish
Manish Manish May 04, 2021 7:58PM ET
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changing words again just for sale of Stock Market
Manish Manish
Manish Manish May 04, 2021 7:58PM ET
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sake of Stock Market
Notvery Goodathis
Peteymcletey May 04, 2021 1:29PM ET
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well duh
Me comment
Me comment May 04, 2021 12:49PM ET
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Go get those rich Joe sock it to them, the can afford the increase out of petty cash. I'd pass a surcharge tax on any voter registered and voting for a republican as well.
Andrew Allen
Andrew Allen May 04, 2021 12:49PM ET
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You can't help an economy by destroying wealth with taxes dumguy
Adam Paine
Adam Paine May 04, 2021 12:47PM ET
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interest rate hike coming sooner than predicted
stanley shalala
stanley shalala May 04, 2021 12:38PM ET
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Old man only make thing worse.
danny Levine
danny Levine May 04, 2021 11:48AM ET
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it does make a big difference- it made things worse!
 
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