[ad_1]
Former Treasury Secretary Janet Yellen predicts President Donald Trump‘s tariffs will cause prices to rise and average household income to fall, despite a slowing trend in the U.S. inflation rate.
“I would expect inflation, on a year-over-year basis of this year, to shoot up to at least 3%, or slightly over, because of the tariffs,” Yellen said Thursday on CNBC’s “Money Movers.”
The Biden-era Cabinet secretary made that prediction even as she noted that when it comes to Trump’s tariffs, “There remains a huge degree of uncertainty about exactly what is going to go into effect.”
But “I definitely expect that we’re going to see them impact pricing,” she said.
That will lower average household income, Yellen added. “The most recent and optimistic estimate I’ve seen suggested that the average household will see on the order of $1,000 reduction in income,” due to tariffs and their knock-on effects, she said.
“It could be greater than that, depending on how things play out with the tariff program,” she said.
The comments came as data from the U.S. Bureau of Labor Statistics has shown the inflation rate rising less than expected in recent months.
Trump has pointed to that trend to fuel his latest attacks on Federal Reserve Chair Jerome Powell to lower interest rates. At the White House later Thursday, Trump slammed Powell as a “numbskull.”
Trump’s allies, meanwhile, have argued that tariffs do not contribute to inflation.
Yellen, who also served as Fed chair from 2014 to 2018, said the central bank should right now “worry about the possibility of second-round effects or wage increases or inflation expectations feeding into continued inflation.”
The Fed does not have a “good handle on how the tariffs are going to affect either spending in the labor market or inflation,” she said.
“So I would expect them to remain firmly in latency territory,” she added, suggesting that the Fed is likely to continue its wait-and-see approach.
[ad_2]
Source link
