Speaking at the Reuters Next conference, U.S. Treasury Secretary Janet Yellen noted that the stimulus, which were introduced at the start of the pandemic, helped fuel a very strong recovery. But also, she added, they did contribute somewhat to inflation, while the pandemic added factors.
Yellen also said that wage and price behavior will be the key signs to watch to detect whether the U.S. economy is “overheating." She also noted that labor shortage is starting to put upward pressure on wages, adding that it is the Fed's job to avoid any “wage-price spiral”.
Also, she suggested that cutting some tariffs on imported goods, which were imposed by the Trump administration, could help cool price pressures, but that wouldn’t be a “game-changer.”
Regarding the new coronavirus strain, Yellen noted that the threat the Omicron variant poses to the economy is very uncertain at this point, but she hopes that it will have a limited effect.
In addition, she said that a strong U.S. economy, which could likely prompt interest rate hikes, is good for emerging markets and the world, noting that it is up to the Fed to decide when to raise rates.