How Did They Get Inflation So Wrong?
Last week, Treasury Secretary Janet Yellen did something unusual for a Washington policy maker: She admitted that she’d made a mistake. In an interview with CNN’s Wolf Blitzer about the U.S.’s persistently high inflation rate, Yellen said, of her predictions last year that prices would stay under control, “I was wrong then about the path that inflation would take.”
That she was. In March 2021, when inflation hawks were arguing that the Biden administration’s $1.9 trillion stimulus plan was going to overheat the economy, Yellen the risk of inflation “small” and “manageable,” and a couple of months later , “I don’t anticipate that inflation is going to be a problem.” She wasn’t alone. For much of 2021, Federal Reserve Chair Jerome Powell said that he thought inflation would be “,” and even as inflation rose above 6 percent, the Fed kept interest.)
