“I don’t immediately see that as a reason to change,” the inflation target, Yellen told reporters Thursday in Bonn, Germany, referring to the potential for deglobalization to boost the trend rate of price increases. “The challenge is to meet the inflation targets that have been established.”
US consumer prices have surged by more than an 8% annual rate the past two months, and some economists have questioned whether the Fed will be able to bring gains down to the 2% target for years. That’s in turn spurred speculation the Fed may need to boost its target.
Yellen is in Bonn attending meetings of finance ministers and central bank governors from Group of Seven advanced economies. She said at Thursday’s gathering, a key message among the group was that it will “stand by” Ukraine, with a fresh commitment of support coming.
The US Senate on Thursday approved a $40 billion aid package for Ukraine. From that amount, Yellen said Kyiv would receive $7.5 billion in “pure economic support that takes the form of grants.”
Other G-7 countries are collectively expected to kick in about the same amount for an assistance plan that will be announced Friday at the conclusion of the Bonn meetings.
German Finance Minister Christian Lindner said Thursday his country would contribute 1 billion euros ($1.1 billion).
“As we went around the table I can tell you there were general expressions of support,” Yellen said of the finance ministers’ gathering. “All of us pledged to do what’s necessary.”
The Treasury chief said officials also discussed ways to limit Russia’s oil revenues while minimizing the impact on energy prices. The US has already banned oil imports from Russia, and European Union countries are aiming to do the same, gradually over the next year.
“The objective is to keep some Russian oil flowing to the market to hold down global prices so we don’t have undue negative impacts,” Yellen said.
Other alternatives are being contemplated, she said, including forming a type of “buyers’ cartel” that would cap the price of oil allied countries are willing to pay for Russian oil.
“A lot of people, including me, find it appealing from a general economic point of view, but actually making it operational is challenging and all of these issues haven’t been worked through,” she said.
As for the US economy, Yellen said the Fed faced a difficult challenge in trying to bring down inflation without provoking a recession. She reiterated her view that “it requires both skill and luck.”
“It’s conceivable there could be a soft landing,” she said. “But this is a very difficult economic situation. Not only with the supply shocks that we’ve had but with the war continuing, with sanctions continuing to be applied. We may face more inflationary risks to the global economy.”
© 2022 Bloomberg L.P.