Yellen: Rates might have to rise to keep the economy from overheating

Comments from the Treasury Secretary at event held by The Atlantic:

Comments from the Treasury Secretary at event held by The Atlantic:
  • Biden is addressing long-standing problems in the economy
  • Marginal tax rates are much less effective in influencing growth than many thought
  • Expect to be in an environment of low interest rates for some time but still need to make sure deficits remain manageable
  • Little evidence of a burst of investment after Trump tax cuts

This comment has sent equities to the lows of the day and the US dollar sharply higher.

Yellen is no longer Fed chair and Powell won’t like this line of talk. It’s puzzling that she would go down this road.

Here’s the full quote:

“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 seems to be talking about market-driven rates but it’s a bizarre comment from someone who should definitely know to stay in her lane.

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