Yellen expects inflation to linger, then ease later in 2022

She named health and child care concerns as two reasons why “many firms are experiencing a shortage of labor.” And shutdowns related to Covid-19 in Asia have impacted the import of good, she said, including a shortage in semiconductors that has pushed up prices of used cars and a reduction in the production of new cars.

“This is temporary pains that result from a Covid economy,” Yellen said.

Still, the Treasury secretary said she expects conditions to improve and the supply bottlenecks to subside. And she credited the American Rescue Plan passed in March for giving Americans “enough income and support to get through this while still being able to put food on their tables and keep roofs over their heads.”

“As we get beyond the pandemic, I expect labor supply to increase,” Yellen said. “It’s good, I think, to see wages begin to rise, especially for those Americans who had the most insecure jobs and the lowest wages. To see some improvement there is something we should be pleased with.”

The Treasury secretary also reiterated the need for Congress to raise the debt ceiling. The U.S. is projected to default on its debt on about Dec. 3 unless Congress acts.

Yellen reiterated that a default would be “utterly catastrophic” and threaten the viability of America’s assets, which she said are regarded as “the safest on the planet.”

Yellen said she would leave it to House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer on how to raise the debt limit, adding it was her personal view that Republicans and Democrats share the responsibility.

Yellen also noted that raising the debt limit is about ensuring the U.S. can pay for its past spending and borrowing decisions, not future ones.

Earlier on the CNN show, Pelosi again appeared open to Democrats alone raising the debt limit through reconciliation if Republicans remained unified in opposition.

“That’s one path,” Pelosi said. “But we’re still hoping to have bipartisanship.”

Enough Republicans in the Senate supported temporarily raising the debt limit earlier this month to avoid the reconciliation process and ensure a default wouldn’t occur until December.

Pelosi said failing to raise the debt limit could have “consequences that could last for decades,” including millions of lost jobs. And she highlighted her grievance that most of this debt accrued under then-President Donald Trump and that Republicans raised the debt limit when he was president.