The Blubber

Former Treasury Secretary Janet Yellen warned Thursday that President Donald Trump’s tariffs are likely to push prices higher and reduce average household income, even as overall U.S. inflation has recently shown signs of slowing.

“I would expect inflation, on a year-over-year basis of this year, to shoot up to at least 3%, or slightly over, because of the tariffs,” Yellen said during an appearance on CNBC’s Money Movers.

Though she acknowledged “a huge degree of uncertainty about exactly what is going to go into effect” with Trump’s tariff plans, she was clear: “I definitely expect that we’re going to see them impact pricing.”

That impact, she said, will translate into financial strain for households. “The most recent and optimistic estimate I’ve seen suggested that the average household will see on the order of $1,000 reduction in income” as a result of tariffs and their ripple effects. “It could be greater than that, depending on how things play out with the tariff program,” she added.

Yellen’s comments came as data from the U.S. Bureau of Labor Statistics showed the inflation rate rising less than expected in recent months. Trump has seized on that trend to intensify his criticism of Federal Reserve Chair Jerome Powell, again calling on the Fed to lower interest rates. Speaking at the White House later that same day, Trump referred to Powell as a “numbskull.”

Trump and his allies have continued to argue that tariffs are not fueling inflation. But Yellen, who also served as Fed chair from 2014 to 2018, cautioned that the central bank should be alert to “second-round effects or wage increases or inflation expectations feeding into continued inflation.”

She said the Fed lacks a “good handle on how the tariffs are going to affect either spending in the labor market or inflation,” and suggested that policymakers are likely to stay on the sidelines for now. “So I would expect them to remain firmly in latency territory,” she said.