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US Treasury secretary Janet Yellen has said “substantial increases” in living costs are a “problem to a lot of people” as persistent inflation dents President Joe Biden’s standing with voters ahead of November’s election.
Prices for housing and everyday goods were still high for many voters, Yellen acknowledged, despite strong wage growth in recent months.
“They see it when they shop for food. They see it in terms of rentals. With higher mortgage rates, it’s tough for young people who would like to buy a house to enter the market,” Yellen said in an interview with the Financial Times on Thursday.
“Although wages have gone up significantly, and, at least on average, more than prices have gone up, there are substantial increases in prices that are important to people — and it’s substantial increases in a relatively short period of time that are very noticeable to people,” she said.
The comments from the US’s most senior economic official come as polls show Biden continuing to trail his Republican rival Donald Trump with just over five months until the presidential election.
Surveys consistently also indicate respondents do not credit Biden with the US economy’s strong performance in recent months, with inflation still one of their top concerns.
The most recent FT-Michigan Ross poll found 43 per cent of voters trusted Trump’s handling of the economy, compared with 35 per cent for Biden. Only 28 per cent of voters thought Biden had helped the economy.
The consumer price index is up more than 19 per cent since Biden took office, with the cost of essentials such as food and petrol among those that have increased sharply.
Data from the Swing State Project published on Thursday showed 54 per cent of voters said the cost of living was the best way to measure the strength of the economy — and 59 per cent thought Biden could control inflation.
The Federal Reserve is expected to hold interest rates at a 23-year high of 5.25 per cent to 5.5 per cent in the coming months, dealing a blow to Democrats who hoped to see a sharp fall in mortgages and other borrowing costs before the election.
Republicans have seized on voters’ concerns over high prices to criticise Biden for climate and other policies they say have pushed up prices, depicting Democrats as out of touch with ordinary people.
But Yellen, a former Fed chair, struck an empathetic tone about the pressures facing Americans, while pointing to the administration’s efforts to reduce costs, such as by eliminating “junk fees” that surreptitiously add extra charges on US consumers.
“The cost of living is a problem to a lot of people,” Yellen said in Stresa, Italy. “So I think this is a concern that people legitimately have.
“President Biden understands that and intends to address it as best as he can using the tools that we do have. And he’s done a number of important things to do so.”
Biden has pinned some of the blame for inflation on companies, accusing them of profit-gouging and “shrinkflation”— a practice in which manufacturers downgrade a product’s size or quality, but charge the customer the same price.
US inflation hit a multi-decade high in 2022 as the economy recovered from the Covid-19 pandemic. It fell sharply last year but remains above the Fed’s target of 2 per cent.
Most economists view the surge in prices as primarily a global phenomenon, driven by pandemic-related shortages for certain goods, along with geopolitical factors such as oil price rises.
US inflation has proven stickier than elsewhere, however, with some economists citing the country’s strong labour market as the cause and others blaming aggressive fiscal stimulus from both the Biden and Trump administrations.
