By David Lawder
HERNDON, Virginia (Reuters) – U.S. Treasury Secretary Janet Yellen said on Friday that inflation was not becoming “embedded” in the U.S. economy and that domestic investment in semiconductors and research would help boost American production capacity.
Yellen, speaking to reporters at a tech business incubator near Dulles International Airport, said she saw no signs of higher medium-term inflation expectations embedded in wages and prices. .
“I don’t believe it fits into the US economy,” she said of inflation when asked about recent consumer price index data showing persistent increases in non-food and non-energy core inflation factors, including rents.
Yellen said the report showed more work was needed to bring inflation down, but there were also early signs of an easing in production costs, in metrics such as supplier deliveries and fees. shipping, which would “fuel lower inflation over time”.
In another campaign-style economic speech to the Virginia Innovation Partnership Corp, Yellen said investments like President Joe Biden’s $430 billion energy and health care legislation would reduce some costs for Americans and reduce the inflation over time by increasing the productive capacity of the US economy.
Touting the $52 billion CHIPS and Science Act, Yellen said it would help reverse a research investment gap that has put the United States at risk of losing its technological lead to China and other countries. other competitors.
“Our government’s failure to invest in innovation has had far-reaching impacts on our long-term economic well-being. At the most fundamental level, it has impacted our productive capacity. This is the ceiling what our economy can produce,” Yellen said.
By one measure, the 2021 chip shortage slashed economic growth by about a percentage point as production of cars and other goods was constrained, Yellen said, adding there was little capacity in United States for the most advanced semiconductors.
Building a semiconductor ecosystem at home will help mitigate the risks of a severe chip shortage,” she said.
Raising capital into semiconductors and clean energy, through a recently enacted climate and medicine package, and boosting research and development will increase the overall productive capacity of the US economy.
“And in return, we’re increasing America’s long-term economic prospects,” Yellen said.
(Reporting by David Lawder; Additional reporting by Doina Chiacu and Heather Timmons; Editing by Paul Simao and Andrea Ricci)