Treasury Secretary Janet Yellen said Thursday that Americans will likely see another year of “very uncomfortably high” inflation as Russia’s invasion of Ukraine muddles her prior forecast that price acceleration would moderate in the months ahead.
“I think there’s a lot of uncertainty that is related to what’s going on with Russia in Ukraine,” Yellen told CNBC’s “Closing Bell.”
“And I do think that it’s exacerbating inflation. I don’t want to make a prediction exactly as to what’s going to happen in the second half of the year,” she continued. “We’re likely to see another year in which 12-month inflation numbers remain very uncomfortably high.”
The Treasury secretary’s comments came just hours after the Labor Department published its latest gauge on how fast prices are climbing for American consumers. The report showed that consumer prices rose 7.9% in the 12 months ending in February, the hottest pace of inflation since 1982.
Those remarks also come just months after Yellen told CNBC that she expected inflation to moderate toward the end of 2022 as supply-chain hiccups resolved and met fiery consumer demand for goods.
She was reluctant to make a similar forecast on Thursday. Yellen said that Russia’s attack on Ukraine has introduced more uncertainty and driven up the price of several commodities including crude oil and wheat.
Crude oil futures leaped to multiyear highs earlier this week as the Kremlin intensified its assault on Kyiv, sending the price of West Texas oil for April delivery to nearly $130 a barrel on Tuesday. It has retreated somewhat since then and was last trading around $105 a barrel on Thursday.
But the price is still up about $30 a barrel from three months ago.
“We have seen a very meaningful increase in gas prices, and my guess is that next month we’ll see further evidence of an impact on U.S. inflation of Putin’s war on Ukraine,” Yellen said.
“Russia, in addition to exporting oil … Ukraine and Russia are major producers of wheat,” she added. “We’re seeing impacts on food prices, and I think that can have a very severe effect on some very vulnerable emerging market countries.”
The Treasury Department has led the Biden administration’s economic sanctions against Moscow, depriving the country of its access to U.S. dollars and blocking access to a significant portion of the global banking system.
Yellen said the litany of penalties against Russia have been overwhelming and that she continues to consult with her counterparts around the world on how to intensify sanctions if warranted.
“I think the sanctions have been devastating in their economic impact,” Yellen said. “We have all but cut Russia off from the international financial system.”
“The export controls that we have put in place will have a devastating longer, medium-run effect in depriving Russia of the technology that they need to run a modern economy and advance in defense and other areas,” she said. “Russia is experiencing very severe economic consequences. I expect there to be a severe downturn in the Russian economy.”