Treasury Secretary Janet Yellen said Tuesday that she expects inflation to remain “high” this year, even telling lawmakers that the administration’s two-month-old forecast for price increases needs to be revised higher.
A week after admitting that she was wrong about persistent inflation that climbed to a 40-year high of 8.5% this spring, Ms. Yellen told the Senate Finance Committee that the White House also was wrong about its prediction that inflation would average 4.7% in this election year.
She said the forecast, introduced in the president’s fiscal 2023 budget proposal on March 30, needs to be revised already.
“The numbers aren’t locked in, but it’s likely to be higher,” she said.
As she was testifying, gasoline prices hit a new record high national average of $4.91 per gallon on Tuesday. Diesel fuel also hit a new record high of $5.68.
Ms. Yellen said the administration “has done everything that they can” to lower gas prices. She emphasized the need for Americans to transition to solar and wind power over the next few years.
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Republicans on the panel grilled Ms. Yellen about the administration’s failure to contain soaring fuel prices and overall inflation, as well as the president’s plans for tax increases and higher spending.
Sen. John Barrasso, Wyoming Republican, noted that Ms. Yellen said last year there was a “small risk” of inflation, and that the threat was “manageable.”
“That makes me wonder why Americans should put any confidence in your pronouncement and decisions and recommendations today,” Mr. Barrasso said.
Ms. Yellen didn’t reply.
With inflation unlikely to drop significantly by the midterm elections in November, the White House and congressional Democrats are blaming global factors such as Russia’s war in Ukraine and pandemic-related supply chain snarls. The president and his Cabinet members also are trying to convince voters that the economy is strong, with unemployment at 3.6%.
But polls are showing that voters’ top concern is inflation. And more than two-thirds of Americans believe the nation is headed in the wrong direction, as consumers also face shortages of baby formula and rising crime.
Amid those challenges, voters increasingly are questioning the administration’s competence to fix problems, surveys show.
Sen. John Thune, South Dakota Republican, asked why Ms. Yellen predicted last year that high inflation would be “transitory.” She said she was “not anticipating” multiple variants of COVID-19 or Russia’s invasion of Ukraine.
“Both of us probably could have used a better term than ‘transitory,” Ms. Yellen said, referring to herself and Federal Reserve Chairman Jerome Powell. “I do expect inflation to remain high, although I very much hope that it will be coming down now.”
She said reducing inflation “should be our number one priority,” she said, urging lawmakers to pass legislation to reduce the cost of prescription drugs and utility bills.
Republicans said the administration’s big spending and clean energy agenda have left Americans worse off. They blamed in particular President Biden’s $1.9 trillion American Rescue Plan, which passed in March 2021 without a single Republican vote, for sparking higher prices.
“The result, which many predicted, has been inflation at highs not seen in 40 years,” said Sen. Mike Crapo, Idaho Republican.
Democrats didn’t openly blame the administration’s policies, but they agreed with Republicans that families are struggling. Finance Committee Chairman Ron Wyden, Oregon Democrat, said it was the major topic of discussion at recent town-hall meetings in his state.
“People are feeling it at the grocery store and at the gas pump,” Mr. Wyden said, noting that gas has hit an average cost of $5.42 per gallon in Oregon.