“Policy making involves identifying and addressing risks, and the most significant risk we face is a workforce marked by a long period of unemployment,” said Yellen on ABC’s “This Week” program.
“This is a temporary price move,” she said. “To achieve sustained high inflation like the one we had in the 1970s, I absolutely don’t expect that. We had very well-anchored inflation expectations and a Federal Reserve that learned how to manage inflation. I think it is a significant risk and, if it materializes, we will certainly monitor it, but we have tools to deal with it ”, he added.
When pressed by George Stephanopoulos of ABC about federal debt, Yellen said he changed his view “a little” about fiscal sustainability in part because of the global trend of very low interest rates.
“When I think about the debt burden, I think mainly in terms of the interest payments that the government has to pay on those who have that debt. And although the debt increases substantially, on the relative interest payments until this year, the size of the economy has remained quite low, not higher than that of 2007 ”, he said.
“But, of course, we have to make sure that the economy’s budget is on a sustainable path and that is something that we can afford. In the long run, we need to control deficits to ensure that our fiscal situation is sustainable. “