Yellen says she regrets saying inflation was ‘transitory’

Treasury Secretary Janet Yellen said she regrets describing inflation in 2021 as “transitory,” the term several Federal Reserve and Biden administration officials used to describe the pandemic-induced price surges they initially thought would be temporary.

“I regret saying it was transitory. It has come down. But I think transitory means a few weeks or months to most people,” Yellen said during an interview with FOX Business Network’s Edward Lawrence on Monday.

Treasury spokesman Christopher Hayden said in an email to The Hill that this was not the first time Yellen expressed regret for calling inflation “transitory,” which she previously said during an interview with WBUR in January.

Headline inflation fell to 3.2 percent year-over-year in February from its 9.1 percent peak in June 2022, a significant improvement but still higher than the Fed’s mandate to keep price increases to 2 percent annually.

Fed Chair Jerome Powell, who was also dinged for initially calling inflation transitory, and the central bank have hiked interest rates from near-zero in March 2022 to a range of 5.25 percent to 5.5 percent to try to curb inflation by cooling demand. 

While many economists feared the rate hikes could push the economy into a recession a year ago, it now looks like the U.S. economy could be coming in for a rare “soft landing,” the term for slowing down the economy just enough to bring down high prices without triggering a recession.

The runway for the soft landing may be a bit bumpy as inflation is proving to be stickier than usual, but Yellen, a former Fed chair, was optimistic about the overall downward trend in price pressures.

“I wouldn’t expect this to be a smooth path month to month, but the trend is clearly favorable,” Yellen said.

Updated at 4:42 p.m.