Yellen says higher interest rates would be a ‘plus’

Treasury Secretary Janet Yellen on Sunday said higher interest rates in the U.S. would be a “plus,” urging the president to move ahead with his $4 trillion spending plan even if it causes prices to rise.

“If we ended up with a slightly higher interest rate environment it would actually be a plus for society’s point of view and the Fed’s point of view,” Yellen said in an interview with Bloomberg News after her meeting with the Group of Seven finance ministers in London.

Yellen, who served as the chair of the Federal Reserve from 2014 to 2018, said President Biden’s packages come to a total of about $400 billion in spending per year, which she argues is not enough to trigger an inflation over-run.

She said any “spurt” in prices that come as a result of the rescue package will dissolve next year, according to Bloomberg.

“We’ve been fighting inflation that’s too low and interest rates that are too low now for a decade,” Yellen said, adding that “we want them to go back to” a normal interest rate environment, “and if this helps a little bit to alleviate things then that’s not a bad thing — that’s a good thing.”

Yellen’s comments to Bloomberg come about a month after she said interest rates may need to increase to keep the recovering economy from going into overdrive amid the increase in government spending.

“It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat, even though the additional spending is relatively small relative to the size of the economy,” she said in response to a question during an interview at the time.

Biden last month released his 2022 budget proposal, which pulls together three major spending packages Biden has already unveiled: the $2.3 trillion American Jobs Plan, the $1.8 trillion American Families Plan and $1.5 trillion in discretionary spending for fiscal 2022.

The remaining funds will go to mandatory spending programs.