Treasury Secretary Janet Yellen addressed the House Financial Services Committee on Tuesday, providing insights into the current state of the U.S. economy. She emphasized that while inflation is expected to decrease from the recent 2.6% rate reported in the Personal Consumption Expenditure (PCE) index, housing costs may take longer to normalize.
Yellen attributed the inflation spike in 2022 to global supply chain disruptions, which have now largely resolved. “Many of those supply issues are now fully resolved, so much of the pressure has diminished,” she noted.
However, she cautioned that rents and housing costs are likely to remain high for an extended period. Elevated prices, coupled with higher interest rates aimed at curbing inflation, have contributed to recent increases in housing costs. Yellen expressed that “it will be a while before housing costs come down to a more normal level.”
The housing market has been particularly affected by high mortgage rates, deterring sellers who secured low fixed-rate mortgages in previous years from listing their homes. This scarcity of available homes has driven prices upward. Renters are similarly impacted, with rental costs consuming a larger portion of wages nationwide, exacerbating financial burdens.
Yellen acknowledged that while some measures show decreasing costs for home buyers and renters, indicators of housing inflation typically lag about a year behind actual prices. The ongoing challenges in the housing sector underscore the complexities and potential delays in achieving broader economic stability.
Yellen’s testimony reflects ongoing efforts to navigate the economic impacts of inflation and housing dynamics amidst shifting global and domestic conditions.
