Yellen has said Americans do believe that inflation is under control, per Bloomberg.
"Inflation is currently at some of the lowest levels observed in that survey," Yellen mentioned on Thursday, likely referring to inflation expectations from the University of Michigan consumer sentiment survey. She expressed the belief that Americans perceive inflation to be well-controlled. These comments were made during a Q&A session at the Economic Club of Chicago, following a speech highlighting the economic policy achievements of the Biden administration.
Recent data indicated that a key measure of underlying inflation remained at 2% for the second consecutive quarter, aligning with the Federal Reserve's target. Despite robust growth in the fourth quarter (3.3%), Yellen pointed out that Americans are experiencing wage growth that outpaces inflation, contributing to an improved economic outlook.
"People are making progress; they see improvements in their fortunes. I believe that if inflation remains low, they will regain confidence in the economy," she stated. Yellen also suggested that rising productivity, evidenced by recent strong numbers, could be supporting economic activity without fueling inflation. Productivity, measuring output per unit of labor, plays a crucial role in economic growth.
During discussions with reporters, Yellen highlighted the positive aspects of the current economic situation, seeing no signs of resurgent inflation in the latest data. She described the GDP report as reflective of strong spending and productivity improvements, suggesting it poses no imminent threat to a soft landing scenario.
While expressing optimism about potential increases in productivity, Yellen cautioned against premature conclusions, citing ongoing developments like advancements in artificial intelligence (AI). Regarding the country's debt load, she acknowledged its manageability but emphasized the importance of addressing deficits if interest rates remain elevated for an extended period, particularly in the context of an aging population.
