“Maybe interest rates should rise somewhat to make sure our economy does not overheat,” Yellen said during an economic seminar presented by The Atlantic. Although the additional spending is relatively small relative to the size of the economy, it could cause some very modest increases in Interest rates, “according to” CNBC Arabia. “
“These are investments that our economy needs to be competitive and productive,” the US Treasury Secretary added. “I think our economy will grow faster because of them.”
The US economy was already on fire, with first-quarter GDP growth at 6.4 percent, and Goldman Sachs recently said it expects second-quarter growth of around 10.5 percent.
Since the outbreak of the Corona pandemic in March 2020, the US Congress has allocated about $ 5.3 trillion in stimulus spending, resulting in a budget deficit of more than $ 3 trillion in fiscal year 2020 and a shortfall of $ 1.7 trillion in the first half of fiscal year 2021.
The Biden administration is pushing for an infrastructure plan that could see another $ 4 trillion spent on a variety of long-term projects.
And despite the Secretary of the Treasury’s remarks that the United States needs to focus on fiscal responsibility in the long run, she said that spending on matters central to the government’s mission has been ignored for too long.
Yellen said President Joe Biden “is taking a very ambitious approach, making up for more than a decade of insufficient investment in infrastructure, in research and development, in individuals, and in communities and small businesses, which is an active approach.” Long-term problems are exacerbating our economy. “
The Federal Reserve has kept short-term interest rates steady near zero for more than a year, despite the economy growing at its fastest pace in nearly 40 years.
US Fed officials pledged to keep accommodative policy in place until the economy makes “substantial additional progress” towards full and inclusive employment and inflation averaging around 2% over the long term.
Inflation concerns stemmed from all the spending and rapid growth, but Fed officials said that after a short rally this year, price pressures are likely to subside.
Inflation is not a problem and there are tools to tackle it
Yellen said she is not very concerned about inflation becoming a problem, although she added that there are tools to address it should it occur.
Fed Chairman Jerome Powell recently said that the primary tool to control inflation is to raise interest rates.
White House spokeswoman Jane Saki said Biden “definitely agrees with the Treasury secretary” about the potential need for higher rates, according to various media reports.
On concerns about the large US deficit, Yellen said, “We need to pay for some of the things that we do” even though the government still has “a reasonable amount of fiscal space.”