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Treasury Secretary Janet Yellen said the recent rise in prices will subside and the U.S. labor market, while improving, still has a ways to go before returning to pre-pandemic strength.
“We're seeing some inflation but I don't believe it's permanent,” Yellen said at a press conference Saturday after the G-7 finance meeting in London. “We at least on a year-over-year basis will continue, I believe, through the rest of the year to see higher inflation rates -- maybe around 3%.”
Yellen cautioned, though, that officials are still watching price increases closely. “I don't want to say this is mind absolutely made up and closed. We'll watch this very carefully, keep an eye on it and try to address issues that arise if it turns out to be necessary,” she said.
The debate around inflation has intensified in recent months, between those like Yellen who argue that current price increases are being driven by anomalies created by the pandemic -- such as supply-chain bottlenecks and a surge in spending as economies reopen -- and critics who say trillions in government aid could fuel a lasting spike in costs.
The headline measure of consumer prices rose 4.2% in the 12 months through April, and the numbers for May are due to be published on Thursday.
“I personally believe this represents transitory factors,” Yellen said, adding that policy should look past such factors.
Yellen spoke after the G-7 meeting, where policy makers reached a deal on a global minimum tax for some of the most profitable companies.
Read More: G-7 Strikes Historic Deal to Revamp Taxation for Digital Era
“There is a concern among some about fiscal sustainability and an evident desire to begin to withdraw accommodation when things are back on track,” Yellen said. “We think that most countries have fiscal space.”
While the recovery is taking hold, there are still millions of people in the U.S. who lost jobs during the pandemic and have yet to return to the labor force, Yellen said.
“We shouldn't expect this process to be complete in a month or two,” she said, but added that the U.S. could return to full employment by sometime next year.
U.S. job growth picked up in May -- along with worker pay -- and the unemployment rate fell to 5.8%, according to a Labor Department report Friday.
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