Yellen expects U.S. inflation to fall to acceptable levels in second half of next year

U.S. Treasury Secretary Janet Yellen testifies during a Senate Banking, Housing, and Urban Affairs Committee hearing in Washington, D.C., the United States, on Sept. 28, 2021. (Kevin Dietsch/Pool via Xinhua)

The COVID-19 crisis markedly diminished spending on services and caused a reallocation of spending toward goods, U.S. Treasury Secretary Janet Yellen said.

WASHINGTON, Oct. 24 (Xinhua) -- U.S. Treasury Secretary Janet Yellen said on Sunday that she expected U.S. inflation rates to fall to acceptable levels in the second half of next year.

"Monthly rates of inflation have already fallen substantially from the very high rates that we saw in the spring and early summer. On a 12-month basis, the inflation rate will remain high into next year because of what's already happened," Yellen said on the CNN's "State of the Union."

"But I expect improvement... by the middle to end of next year, second half of next year," Yellen said, adding the COVID-19 shock to the economy has caused disruptions that "we will be working through over the next year."

"The COVID crisis markedly diminished spending on services and caused a reallocation of spending toward goods. And the supply of goods to Americans has increased substantially, but there's still pressure there," she said.

Yellen also pushed back against criticism that the United States is about to losing control over inflation.

"I agree, of course, we are going through a period of inflation that's higher than Americans have seen in a long time. And it's something that's obviously a concern and worrying them. But we haven't lost control," she said.

"As we make further progress on the pandemic, I expect these bottlenecks to subside. Americans will return to the labor force as conditions improve," she added.

People walk past a Starbucks coffee shop in Washington, D.C., the United States, July 13, 2021. (Xinhua/Liu Jie)

Yellen's remarks came after the U.S. Labor Department recently reported that U.S. inflation remained elevated in September as supply chain disruptions had persisted for months.

Over the past 12 months through September, the consumer price index (CPI) increased 5.4 percent, slightly up from the 5.3 percent pace for the 12-month period ending August, according to the department.

"More broadly, the logjams across supply chains show no signs of easing yet. Until inventories are rebuilt, goods prices are unlikely to revert to the deflationary trend that pervaded for the better part of the past two decades," said Sarah House, senior economist at Wells Fargo Securities.