Yellen Only Says "No Inflation Concerns"... Calls for Increased Debt Management

US Treasury Yield Surpasses 1.6% but Maintains Existing Stance
Experts Emphasize Need for National Debt Management Measures
Focus on Fed Chair Powell's Remarks This Week

[Image source=AP Yonhap News]

[Asia Economy New York=Special Correspondent Baek Jong-min] Janet Yellen, U.S. Treasury Secretary, stated on the 14th (local time) that the risk of inflation is not significant despite an additional $1.9 trillion fiscal stimulus. While Secretary Yellen repeatedly insists there is no inflation concern even as the U.S. 10-year Treasury yield has surged to 1.625%, voices calling for national debt management measures are growing louder.

In an interview with ABC on the 14th (local time), Secretary Yellen said, "Is there a risk of inflation? I think there is only a small risk, and it is manageable."

She added, "I do not consider it a significant risk," emphasizing, "If such a situation concretely arises, we will definitely monitor it and have the tools to respond."

After President Biden signed the stimulus bill a day ahead of schedule on the 11th, inflation concerns resurfaced, pushing U.S. Treasury yields back into the 1.6% range, but Secretary Yellen dismissed this as a "temporary price movement."

She drew a line by saying, "I absolutely do not expect persistent high inflation like in the 1970s."

Regarding the timing of employment recovery, she said, "If we overcome the pandemic, I hope we can return the economy to a state close to full employment by next year." Secretary Yellen continues to mention that U.S. employment will normalize by next year based on the stimulus bill.

Jerome Powell, Chairman of the Federal Reserve (Fed), who is another key figure driving the U.S. economic recovery alongside Secretary Yellen, takes a stance that there is still a long way to go for employment recovery. He estimated that the actual U.S. unemployment rate, which has dropped to 6.2%, is around 10%.

Chairman Powell is scheduled to hold a press conference after the Federal Open Market Committee (FOMC) meeting on the 16th-17th. Given that Powell previously heightened market inflation concerns, the market is likely to be volatile depending on his remarks.

U.S. media outlets such as The New York Times are placing great significance on Powell’s statements and the FOMC decisions this week.

The issue of U.S. fiscal soundness is also receiving renewed attention. Regarding the increase in national debt due to the government’s large-scale fiscal input, Secretary Yellen responded, "It is manageable, but there is a need to control deficits in the long term."

According to The Wall Street Journal (WSJ), as of March 1, U.S. national debt reached $21.9 trillion, increasing by $4.5 trillion since the COVID-19 crisis. WSJ described this as the highest level since World War II when considering economic output.

Regarding the wealth tax that President Biden has mentioned since his candidacy as a means to increase tax revenue, she stated, "It has not been decided yet, but it can be considered."

Economic experts have argued that the U.S. government should consider guidelines to manage debt at an appropriate level under zero interest rate conditions.

Peter Orszag, former director of the Congressional Budget Office (CBO) during the Barack Obama administration, expressed concern, saying, "Even if the immediate fire is put out, this issue will be an important and ongoing topic for the next four or eight years."

WSJ warned that although there are no immediate concerns about high inflation or fiscal crisis, the situation could change in the future. The CBO recently projected that by 2051, U.S. national debt will double relative to the current gross domestic product (GDP).

Lawrence Summers, Harvard professor and former Treasury Secretary under the Barack Obama administration, criticized the Biden administration’s fiscal management awareness, saying, "If you pour too much water into the bathtub, it will start to overflow," and "We are trying to pour in too much water."

This content was produced with the assistance of AI translation services.