Treasury Chief Sees ‘Modest’ Interest-Rate Rise Amid Massive Spending

Treasury Secretary Janet Yellen said interest rates might have to rise modestly to prevent the U.S. economy from overheating due to higher levels of government spending, without specifying a timeframe.

“It may be that interest rates will have to rise somewhat to make sure our economy doesn’t overheat,” Yellen said in an interview with The Atlantic recorded Monday that was broadcast on the web Tuesday. “It could cause some very modest increases in interest rates.”

Stocks extended their losses Tuesday and the dollar briefly touched session highs after Yellen’s remarks. The yield on 10-year Treasuries pared declines.

The comments from Yellen, a former chair of the Federal Reserve, come amid a debate on whether President Joe Biden’s raft of proposed and enacted government spending could spur a surge in price pressures. Administration and Fed officials both have consistently dismissed concerns over accelerating inflation. They have argued price increases expected this year will be largely transitory, and the central bank has the tools to contain any persistent effects.

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{Matzav.com}