Treasury Secretary Janet Yellen said Tuesday that US interest rates may have to rise “somewhat” to cover the economy if President Joe Biden’s latest spending proposal is enacted.
However, Yellen said that the proposed infrastructure and family investment over the next decade will be needed to stay competitive and boost growth in the United States.
After receiving approval for a $ 1.9 trillion pandemic bailout program in March, Biden made two more proposals totaling nearly $ 4 trillion over a decade, partially paying tax increases to businesses and the wealthy.
The goal is to refresh the US economy after the Covid-19 pandemic caused a serious recession in 2020.
Although these investments are long-term, “it may be necessary to raise interest rates somewhat to prevent the economy from overheating,” Yellen said in a pre-recorded conversation with the Atlantic Ocean. ..
However, “additional spending is relatively small compared to the size of the economy.”
The Federal Reserve Board has promised to keep interest rates near zero until employment recovers and inflation exceeds its 2% target level for some time, but economists and investors say government spending is inflationary. More and more warnings are being given that it will cause a spiral.
Federal Reserve Board Chair Jerome Powell and colleagues said the short-term price hike was due to a backlash from the unprecedented impact of Covid-19 and a temporary supply problem associated with the resumption of economic activity. , Trying to alleviate these concerns.
Yellen acknowledged that spending plans could “cause a very modest rise in interest rates,” but “these are the investments our economy needs to be competitive and productive. Is. “
Biden has proposed a $ 2 trillion US employment plan, including funding green technology, increased broadband Internet access, and home water repairs, while paying for road and bridge renovations.
His latest proposal is $ 1.8 trillion in American family planning, which will put money into childcare, early education, and college.
Mr Yellen said it was important for the government to “keep the deficit small and manageable.” Therefore, the White House has proposed increased investment payments and tax collection.
“Suggests that the gap between what we collect on taxes under tax law and what we should collect if everyone is obliged to pay taxes will exceed $ 7 trillion in 10 years. It’s really shocking and painful to see the estimates you make, “she said.
“We are taking meaningful steps to fill that gap.”
US Interest Rates May Have To Rise As Economy Grows: Yellen Source link US Interest Rates May Have To Rise As Economy Grows: Yellen