One day after an unexpectedly hot inflation report sparked a sell-off in stocks, Treasury Secretary Janet Yellen told a Detroit audience it’s important to keep the long-term trend in sight.
January’s headline inflation figure rose to 3.1% year-over-year and core inflation hit 3.9%. The Magnificent Seven stocks lost more than $250 billion in market value in the resulting sell-off Tuesday.
“The trend here is that inflation is moving decisively down,” Yellen told Michigan Gov. Gretchen Whitmer Wednesday in a conversation before the Detroit Economic Club.
After inflation rose to levels last seen in the late 1970s and early 1980s, it is now falling to levels consistent with the Federal Reserve’s goal, Yellen said.
The S&P 500, which is tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY), lost 1.6% Tuesday. The Nasdaq 100, which is followed by the Invesco QQQ Trust (NASDAQ:QQQ), lost about 2%. On Wednesday afternoon, the S&P 500 was trading 0.43% higher and the Nasdaq was gaining back 0.68%.
Gas is now averaging under $3 per gallon, and the price of eggs and new and used car prices have declined, she said.
“Most importantly, wages have gone up. And they’ve gone up quite a lot. They’ve gone up especially large amounts for lower-income workers,” Yellen said.
The median U.S. worker can buy the same basket of goods and services they could in 2019 as inflation has declined and wages have risen, she said — and have $1,400 left on top of that for spending and saving.
“I think most Americans are beginning to feel better about the economy.”
In contrast to how other advanced economies weathered the COVID-19-driven economic downturn and the rise of inflation, the U.S. has fared better, she said.
“Our economy has grown more. Inflation has come down more. Wages adjusted for inflation have risen more than in any other advanced country.”
Yellen noted the struggles middle-class families continue to face, including child care, jobs for those without a college degree and health care and education expenses.
“There are serious…
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