Janet Yellen echoes ECB in 'temporary' inflation call

US Treasury Secretary Janet Yellen said "we'll see lower monthly inflation rates, I think, by the second half of (2022)".

US Treasury Secretary Janet Yellen has said she still sees inflation as a temporary result of severe supply chain bottlenecks, and expects price increases to normalise during 2022 as people get back to work and demand shifts back to services.

"As demand shifts back to services and supply has a chance to adjust, I believe that price increases will normalise and we'll see lower monthly inflation rates, I think, by the second half of (2022)," Ms Yellen said.

Ms Yellen said inflationary pressures had been fueled by shortages of semiconductors and a rise in energy prices, but energy prices would begin to moderate in the months ahead.

She noted that people were more confident about the job market, and income levels were going up, especially for workers in the service sector.

Her remarks echoed those of ECB president Christine Lagarde, who said on Thursday, that inflation above 2% in the eurozone should be temporary and that she expects price pressures to ease next year.

She acknowledged the decline would take longer than the ECB had initially expected, but said favourable financing conditions created by its ultra-easy policy were still essential for the eurozone economy to recover from the Covid-19 pandemic.

"We see inflation rising further in the near term but then declining next year," Ms Lagarde said.

- Reuters