Yellen: we don't have to get prices down because wages are going up

During her testimony before the Senate Banking Committee on Thursday, Yellen acknowledged that prices for most items are unlikely to revert to pre-inflation crisis levels, which emerged in 2021.

"I don't anticipate prices returning to previous levels. Some prices will remain higher than pre-pandemic levels," Yellen remarked during a heated exchange with Sen. John Kennedy, R-La. "However, wages have seen significant increases, and the rate of price hikes has moderated over the past six months."

Throughout 2021 and 2022, prices for various goods such as groceries, new vehicles, and health insurance surged due to rampant inflation, triggered by disruptions in the global supply chain induced by the pandemic, a tight labor market, and heightened consumer demand fueled partly by stimulus funds.

Despite the notable deceleration in inflation in recent months, Yellen indicated that prices for most goods have not yet subsided and are unlikely to do so.

"We don't necessarily need to lower prices because wages are on the rise," she explained, highlighting that the median American worker can now purchase the same basket of goods as in 2019 with $1,400 remaining. "Therefore, on average, Americans are in a better financial position despite the higher price levels."

Federal Reserve Chair Jerome Powell echoed similar sentiments in a "60 Minutes" interview aired on Sunday.

"Some prices may decrease while others may rise, but an overall decline in price levels is not expected. Such declines are uncommon in economies, except under very adverse conditions," Powell stated.

Although inflation has significantly decreased from its peak of 9.1% recorded in June 2022, it remains above the Federal Reserve's target of 2%. Compared to January 2021,