There are no grounds for fears that the US economy is overheating, US Treasury Secretary Janet Yellen assured market participants. The policymaker is optimistic that the US economy is firmly on the path to a steady recovery. Janet Yellen has already spotted some green shoots of recovery, albeit it looks patchy. To visualize the manner of an economic revival, the Treasury Secretary compared the appropriate chart to the K-letter. The upward leg of the “K” represents resilient economic sectors which have been expanding despite the pandemic. The downward leg of the “K” symbolizes the businesses directly affected by the coronavirus crisis. It does not make sense to raise notably inflation expectations, hoping for firmly high inflation rates in the near future. In fact, the US Treasury does not foresee rampant inflation rates. At the same time, some fundamental factors set the stage for a rise in consumer inflation in the short term.
Janet Yellen noted that the stimulus bill worth $1.9 trillion which had recently come into force could pose risks of inflation acceleration. From her viewpoint, if the relief package actually pushes inflation up, the US Treasury has enough tools at its disposal to keep it in check. Further financial aid from the federal government to businesses and households is expected to revitalize macroeconomic metrics. Apart from increased weekly unemployment benefits, the newly-adopted relief program includes extra one-time $1,400 stimulus checks to help Americans survive the crisis. People will see this amount deposited directly to their bank accounts in March.
