The US Treasury Secretary has said inflation could reach as high as three per cent this year as the economy rebounds from the worst of the pandemic.
“We have in recent months seen some inflation, and we — at least on a year-over-year basis — will continue, I believe through the rest of the year, to see higher inflation rates, maybe around 3 percent,” Yellen said following a meeting of the G7 finance ministers. “But I personally believe that this represents transitory factors.”
The Federal Reserve aims for a two per cent annual inflation target, but the central ban has made it clear it will not combat inflation and hike interest rates until there has been progress in the jobs market.
Last week figures showed the US added 559,000 jobs in May, with the unemployment rate falling from 6.1 per cent to 5.8 per cent in a month.
However the Bureau of Labor Statistics figures show it is still significantly higher than the 3.8 per cent unemployment rate recorded in February 2020 before the pandemic hit.
Policymakers have previously insisted the price pops are temporary and the current uptick does not reflect a persistent trend.
“We will watch this very carefully,” Yellen said. “I don’t want to say this is ‘mind absolutely made up and closed.’ We’ll watch this very carefully, keep an eye on it and try to address issues that arise if it turns out to be necessary.”