US Treasury Secretary Yellen said Thursday that after the historic surge caused by the COVID-19 epidemic, inflation is now "well controlled", and she believes many Americans will agree with this.
In her latest speech, she said, "Recently, inflation has approached the lowest level seen in surveys. So I believe Americans do believe that inflation is under control." The survey she referred to refers to the inflation expectations in the University of Michigan Consumer Confidence Survey report.
The GDP data report released earlier on Thursday showed that the core PCE price index in the United States recorded an annualized quarterly rate of 2% for the fourth quarter, maintaining a level of 2% for the second consecutive quarter, in line with the Federal Reserve's goal. Moreover, this was achieved against the backdrop of an unexpectedly strong 3.3% growth in the US economy in the fourth quarter of last year.
Yellen emphasized that Americans also benefit from wage increases that currently exceed inflation.
"People are making progress. They see their wealth improving, and I believe that if inflation remains low, they will start to regain confidence in the economy," she added.
In addition, Yellen also suggests that productivity, a key component of economic growth, may be on the rise, which helps explain why strong economic activity has not hindered a slowdown in inflation.
"We have some strong productivity data recently," she said. "If productivity is improving and output is increasing, it's all good news."
Soft landing
In the latest data, Yellen did not see any signs of inflation recovery.
"This is a good thing, reflecting strong and healthy spending and productivity improvements, and is likely not to bring inflation challenges," she said of the GDP report. "I don't see any signs of a threat to a soft landing in this report."
The data released by the Bureau of Economic Analysis of the US Department of Commerce on Thursday showed that the initial annualized quarterly growth rate of real GDP in the fourth quarter recorded a 3.3% increase, and the full year economic growth rate in 2023 was 2.5%, easily breaking economists' expectations.
However, she warned that it is too early to announce a long-term increase in productivity now.
"We may be in a period of faster productivity growth. There are many articles about artificial intelligence and its potential to enhance productivity growth, but this is entirely speculative," she added.
Yellen also said that although the cost of the US debt burden is still controllable, if interest rates remain high for a longer period of time, it will pose a threat to fiscal sustainability.
She said, "If interest rates remain high for a longer period of time and due to an aging population, we do need to take measures to ensure that our deficit decreases and remains at a controllable level."