Yellen says interest rates may need to increase
By Niv Elis - 05/04/21 12:58 PM EDT Treasury Secretary Janet Yellen on Tuesday said that interest rates may need to increase to keep the recovering economy from going into overdrive on the heels of significant government spending.
“It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat, even though the additional spending is relatively small relative to the size of the economy,” she said in response to a question on a panel hosted by The Atlantic about whether the economy could absorb the large dose of spending President Biden was proposing.
"Even though the additional spending is relatively small relative to the size of the economy, it could cause some very modest increases in interest rates,” she added.
Critics of the major spending push have warned that it will push up prices, as government funds boost demand faster than production of supply can keep up.
Were inflation to take hold in a serious way, it would erode purchasing power, particularly for low earners, and could require interest rate hikes to get inflation back in line. An increase in interest rates could slow or even reverse the economic recovery.
Federal Reserve Chairman Jerome Powell has said that the recent uptick in prices is likely to be temporary and that he doesn't expect interest rates to rise this year, but that the central bank is closely monitoring inflation.
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https://thehill.com/policy/finance/551720-yellen-says-interest-rates-may-need-to-increase