London Daily

Focus on the big picture.
Saturday, Oct 04, 2025

Treasury Chief Yellen Walks Back Claim US Economy Could ‘Overheat’ This Summer

Treasury Chief Yellen Walks Back Claim US Economy Could ‘Overheat’ This Summer

As vaccination rates steadily increase in several parts of the globe, economists have made increasingly optimistic economic growth predictions, with the latest saying the US economy could grow 7.6% in 2021, the steepest pace it’s seen since 1951, and similar predictions being made for China.

Treasury Secretary Janet Yellen was forced to walk back comments on Tuesday about the potential for interest rates to rise later this year after the stock market reacted poorly to the news.

Speaking at an event hosted by the Atlantic that morning, Yellen said that as COVID-19-related social restrictions are steadily relaxed later this year, "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.”

"It could cause some very modest increases in interest rates to get that reallocation, but these are investments our economy needs to be competitive and to be productive [and] I think that our economy will grow faster because of them,” she added.

It’s not just the return of more regular commerce patterns that could set the economy steaming again: the Biden administration has also spelled out huge plans for some $4 trillion in economic spending, including huge infrastructure projects and social programs designed to mitigate or temporarily alleviate the rising poverty created or exacerbated by pandemic-related lockdowns.

Yellen said she expected the programs to make a “big difference” in inequality in the country.

Although the first two months of 2021 were among the most grim of the pandemic, with more than 150,000 people dying of COVID-19 in just a couple of weeks, the economy quickly began to recover, and gross domestic product had jumped by 6.4% by the end of the first quarter. Yields on long-term Treasury bonds have also risen, as has the consumer price index.

All of these point to likely inflation on the horizon, which is when the value of currency decreases and is able to buy fewer goods for the same amount than before. The markets thus took Yellen’s comments seriously, and tech stocks suffered their worst day since March as the Nasdaq Composite declined by 1.9% and Apple stocks fell by 4%. Stocks for tech firms were well-buttressed by the pandemic, as millions of people shifted to remote working, consuming, and communicating from home to avoid unnecessary spread of the virus.

That’s why, later on Tuesday, the Treasury chief told the Wall Street Journal’s CEO Council Summit: “I don’t think there’s going to be an inflationary problem, but if there is, the Fed can be counted on to address it.”

Under former US President Donald Trump, the Federal Reserve faced heavy pressure to keep interest rates low as the real estate mogul-turned federal executive made stock market performance one of his central measures of success. Yellen, who chaired the central bank prior to Trump’s inauguration in 2017, told the WSJ that “if anybody appreciates the independence of the Fed, I think that person is me. It’s not something I’m going to give opinions about.”

Newsletter

Related Articles

0:00
0:00
Close
Trump Administration Launches “TrumpRx” Plan to Enable Direct Drug Sales at Deep Discounts
Trump Announces Intention to Impose 100 Percent Tariff on Foreign-Made Films
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Singapore and Hong Kong Vie to Dominate Asia’s Rising Gold Trade
Trump Organization Teams with Saudi Developer on $1 Billion Trump Plaza in Jeddah
Manhattan Sees Surge in Office-to-Housing Conversions, Highest Since 2008
Switzerland and U.S. Issue Joint Assurance Against Currency Manipulation
Electronic Arts to Be Taken Private in Historic $55 Billion Buyout
Thomas Jacob Sanford Named as Suspect in Deadly Michigan Church Shooting and Arson
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
New York Man Arrested After On-Air Confession to 2017 Parents’ Murders
U.S. Defense Chief Orders Sudden Summit of Hundreds of Generals and Admirals
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
Trump Claims FBI Planted 274 Agents at Capitol Riot, Citing Unverified Reports
India: Internet Suspended in Bareilly Amid Communal Clashes Between Muslims and Hindus
Supreme Court Extends Freeze on Nearly $5 Billion in U.S. Foreign Aid at Trump’s Request
Archaeologists Recover Statues and Temples from 2,000-Year-Old Sunken City off Alexandria
China Deploys 2,000 Workers to Spain to Build Major EV Battery Factory, Raising European Dependence
Speed Takes Over: How Drive-Through Coffee Chains Are Rewriting U.S. Coffee Culture
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Ringo Starr Champions Enduring Beatles Legacy While Debuting Las Vegas Art Show
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Colombian President Petro Vows to Mobilize Volunteers for Gaza and Joins List of Fighters
FBI Removes Agents Who Kneeled at 2020 Protest, Citing Breach of Professional Conduct
Trump Alleges ‘Triple Sabotage’ at United Nations After Escalator and Teleprompter Failures
Shock in France: 5 Years in Prison for Former President Nicolas Sarkozy
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
BNP Paribas Abandons Ban on 'Controversial Weapons' Financing Amid Europe’s Defence Push
Typhoon Ragasa Leaves Trail of Destruction Across East Asia Before Making Landfall in China
The Personality Rights Challenge in India’s AI Era
Big Banks Rebuild in Hong Kong as Deal Volume Surges
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Arnault Denounces Proposed Wealth Tax as Threat to French Economy
Study Finds No Safe Level of Alcohol for Dementia Risk
Denmark Investigates Drone Incursion, Does Not Rule Out Russian Involvement
Lilly CEO Warns UK Is ‘Worst Country in Europe’ for Drug Prices, Pulls Back Investment
Nigel Farage Emerges as Central Force in British Politics with Reform UK Surge
Disney Reinstates ‘Jimmy Kimmel Live!’ after Six-Day Suspension over Charlie Kirk Comments
U.S. Prosecutors Move to Break Up Google’s Advertising Monopoly
Nvidia Pledges Up to $100 Billion Investment in OpenAI to Power Massive AI Data Center Build-Out
U.S. Signals ‘Large and Forceful’ Support for Argentina Amid Market Turmoil
Nvidia and Abu Dhabi’s TII Launch First AI-&-Robotics Lab in the Middle East
Vietnam Faces Up to $25 Billion Export Loss as U.S. Tariffs Bite
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Indonesia Court Upholds Military Law Amid Concerns Over Expanded Civilian Role
Larry Ellison, Michael Dell and Rupert Murdoch Join Trump-Backed Bid to Take Over TikTok
Trump and Musk Reunite Publicly for First Time Since Fallout at Kirk Memorial
Vietnam Closes 86 Million Untouched Bank Accounts Over Biometric ID Rules
×