Yellen Expects High Inflation Through Mid-2022 Before Easing (The Incredible Janet Yellenstone!!)

And with a wave of her magic wand, Treasury Secretary Janet Yellen (aka, the Incredible Janet Yellenstone) will make inflation magically return to less than 2% after mid-2020.

Treasury Secretary Janet Yellen said she expects price increases to remain high through the first half of 2022, but rejected criticism that the U.S. risks losing control of inflation.

Inflation is expected to ease in the second half as issues ranging from supply bottlenecks, a tight U.S. labor market and other factors arising from the pandemic improve, Yellen said on CNN’s “State of the Union” on Sunday. The current situation reflects “temporary” pain, she said.

“I don’t think we’re about to lose control of inflation,” Yellen said, pushing back on criticism by former Treasury Secretary Lawrence Summers this month. “Americans haven’t seen inflation like we have experienced recently in a long time. But as we get back to normal, expect that to end.”

On Friday, Federal Reserve Chair Jerome Powell sounded a note of heightened concern over persistently high inflation as he made clear that the central bank will begin tapering its bond purchases shortly but remain patient on raising interest rates. 

The S&P 500 Index posted its first decline in eight days, while benchmark Treasuries rallied to send 10-year yields down by the most in more than two months. Inflation expectations remain elevated — the 10-year breakeven rate of 2.64% is within 15 basis points of the record high reached in 2005 — and rates traders maintained bets the Fed will hike at least once within a year.

Powell said policies are “well-positioned” to manage a range of outcomes. 

So Janet, are you saying that home price growth is going to slow to 2% YoY after mid-2022? Or that the Biden Administration is going to build the Canadian pipeline to help ease energy costs? Or that west coast ports get magically unclogged? Or that chips for cars will magically begin appearing?

I forget. The Fed doesn’t consider housing or energy prices in their inflation measurements. So, Yellen and The Fed ignore that most important expenditures for households.

The Fed’s breakeven inflation rates are considerably lower than current core inflation (green line).

No wonder Yellen and Powell can make inflation magically disappear. Don’t count it!

Even former Fed chair Alan Greenspan sees sustained inflation well above The Fed’s 2% target rate.

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