U.S. Treasury Secretary Yellen: Inflation is expected to slow sharply next year And we are optimistic about the economic outlook

U.S. Treasury Secretary Janet Yellen painted an optimistic picture of the future of the U.S. economy, expecting inflation to recede and the potential for stronger growth over the long term.

On Friday, Yellen acknowledged that rising prices were indeed a "legitimate policy concern," but also said, "It is also important to point out that professional forecasters believe inflation will recede significantly next year." She spoke via video at the World Economic Forum's online "Davos Agenda" dialogue.

She also called the U.S. labor market "extremely strong" and called the expected growth rate of 3.3 percent in 2022 a "remarkable economic and policy achievement."

Yellen's speech contrasted with the prevailing public sentiment, which argued that the U.S. economy was on the wrong track, fearing that high inflation would continue to erode household purchasing power.

While economic growth and employment have rebounded strongly from the collapse of the COVID-19 outbreak in early 2020, inflation has risen to a nearly 40-year peak.

Public discontent

The U.S. Consumer Price Index rose 7 percent in 2021, its biggest 12-month gain since 1982, largely due to pandemic-related supply chain constraints and government stimulus measures to support households and businesses through economic hardship.

U.S. President Joe Biden's approval rating fell sharply as the public was dissatisfied with the economic performance. A recent CBS News poll showed that the satisfaction of the public with Biden's handling of the economy was 38%, and two-thirds of the American people believe that Biden did not pay enough attention to the burden of inflation. Meanwhile, the University of Michigan Consumer Confidence Index hit its lowest level in nearly 10 years in November.

Yellen argues that the Biden administration is trying to boost longer-term economic growth by applying so-called "modern supply-side economics," focusing public investment on infrastructure and people while seeking to protect the environment.

"With the recently adopted infrastructure plan and the proposed 'Rebuild a Better Future', we have a clear path forward," she said, referring to the 10-year spending plan currently under consideration by the Senate. "Together, these policies will promote modern supply-side expansion and boost long-term sustainable growth."

Yellen also reiterated her view that while government debt is at historic highs compared to gross domestic product, low interest rates mean the fiscal burden is "manageable." Yellen also said the so-called secular stagnation factors that pulled down interest rates before the pandemic, including excessive savings, are likely to persist after the pandemic.

This article originated from the financial world