Yellen confident U.S. inflation will continue to cool

By Chris Matthews

Treasury Secretary predicts that interest rates could moderate as price increases slow

U.S. stocks SPX DJIA were taking it on the chin Thursday in part because of rising concerns that the U.S. economy will be hobbled by a combination of slower growth and persistently high inflation.

Treasury Secretary Janet Yellen, however, remains confident the U.S. economy is "on a downward path for inflation" that could enable the Federal Reserve to cut interest rates in the months ahead, she said in an interview with Reuters Thursday.

Thursday morning's GDP report showed the Fed's preferred measure of inflation, core PCE, rising to 3.7% in the first quarter of 2024, up sharply from 2% in the prior period.

Yellen argued that these stubbornly high readings are somewhat of a statistical mirage, as housing rental contracts respond to changing market conditions with a significant lag. She noted that housing is the "single most important contributor to inflation."

"When we look at the market for new rentals or for rents on single-family houses, what we see is those rents have stabilized, in some cases fallen," she said. "Ultimately that is what, over time, will govern increases" in the inflation statistics.

Yellen predicted that these trends will enable "interest rates to moderate some," which could also take the wind out of the sails of a surging dollar, though she declined to weigh in directly on what the Fed's next move should be.

-Chris Matthews

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

04-25-24 1218ET

Copyright (c) 2024 Dow Jones & Company, Inc.